When the pandemic first hit the United States, fleets across North America expected purchase delays for a short time, but never expected how long equipment replacements would actually be stalled.
Truck dealers were “hit pretty hard,” said Rush Enterprises chairman and CEO, Rusty Rush. Rush operates more than 100 commercial vehicle dealerships across the country.
Although retail sales of Class 8 trucks have begun to grow steadily since the drop in early spring, WardsAuto data show these purchases are still well below numbers from 2019. According to Rush, fleets paused equipment replacement cycles at the start of the pandemic, and, because many manufacturing companies had to close their doors during that time, new trucks haven’t been readily available.
Still, major fleets need to return to their regular replacement schedules, and Rush believes although the setback was a challenge, trucking companies will be able to get back to their normal growth cycles. He also doesn’t expect any more huge changes will come to replacement purchasing cycles unless another major outside change occurs.
Additionally, used trucks have had drops in sales during the pandemic, but have had their values begin to regulate once again, making it a smoother process for fleets looking to trade in their trucks. Shippers also saw difficulty in securing both trucks and drivers to meet the onslaught of consumer demand, but the market is finally beginning to stabilize.
“It’s like the story of two different years,” said Rush. “There was January through the first half of March, and then the second half of March is when everything changed.”
Research firm FTR vice president, Don Ake, explained that a majority of fleets have halted their replacement orders due to the uncertainty of the pandemic, but larger fleets have continued on, especially beginning in June and July.
Orders are still behind regular replacement demand, though, and Ake said fleets that are confident that the economy is indeed improving right now have begun resuming their regular orders, and less-profitable fleets will likely continue to wait to begin replacement cycles again until 2021.
Ake also noted that although the consumer market may seem to be gaining strength, it’s still receiving support from supplemental government income programs, which have expired. According to FTR, a bumpy recovery will progress into next year, when the market will likely reset.
For refrigerated and last-mile delivery providers, Kenworth Sales Co. president Kyle Treadway said replacement cycles are steady, while carriers within the energy sector are having more trouble.
Treadway also believes that used truck values dropped 5% to 8% lower than their trough during the first quarter of 2020, and said he thinks used truck values have reached their lowest numbers.
For Kenworth, new truck sales have resumed to match his fleet’s 2019 numbers, while used truck sales numbers have fallen by 30%. Treadway also predicts delayed growth numbers during the spring of 2021, and that smaller fleets will begin returning to the market around that time. Fleets will need to catch up from this year’s pause, and replacement cycles will gain traction in 2021 for that reason.
“The uncertainty is the problem, not the outcome,” Treadway said regarding how the upcoming presidential election will affect quarter-to-quarter sales throughout the rest of 2020, which he expects to remain flat. “Groceries and garbage are still going to move, regardless of who’s in the White House.”
The market will see a major shift, though, explained ACT’s Denoyer, who said replacement cycles could become shorter, as fleets have been noticing more late-model used trucks having better trade-in values due to fuel efficiency.
For Penske Truck Leasing, customers will work with the company to evaluate replacements on a truck-by-truck basis, according to the company’s senior vice president of procurement and fleet planning, Paul Rosa.
“We are always evaluating the entire equation,” Rosa said.
With truck technology advancing and trucks becoming more durable overall, they are able to last longer, even if a truck hasn’t moved much throughout the time of the pandemic. Still, Penske’s customers may opt not to have extended first lives of 5-year-old trucks and may instead prefer a newer model with better comforts, safety suites, and fuel mileage–which often help with driver retention and recruitment.
For P.A.M. Transport, although replacement cycles were paused due the pandemic, the company continued to follow its typical three-year replacement cycle plan by allowing the delivery of everything it had ordered before the pandemic, as well as orders it made more recently for trailers set to arrive in late 2020.
“We’ve still got to rotate our fleet,” said Shane Barnes, P.A.M.’s associate vice president of maintenance. “I mean, this isn’t going to last forever.”