Getting crushed in the ripple effect

Blogs Jason Cannon August 28, 2014

Have you ever seen the beginning of a tidal wave? Not the front-facing part; the part that levels everything in its path. The beginning. The genesis.

It’s barely more than a ripple. That ripple builds momentum over time and eventually becomes one of nature’s most powerful forces.

The trucking industry is at the begin- ning of an exciting ripple of its own, and the aftermarket sits squarely in its path.

Sales of new trucks are booming at levels above expectations.

ACT Research increased its 2014 forecast of U. S. Class 8 retail sales to reach 226,900 units, up 21 percent over 2013. Early projections for 2015 are coming in around 235,000.

Since October, Class 8 orders have been booked at a 318,100 units SAAR, according to ACT, and Class 8 net orders year-to-date stand at an average of more than 28,000 per month, 28 percent ahead of last year.

That ripple is certainly a benefit for OEMs and dealers right now, but as time wears on and that momentum builds, it will eventually crash into the aftermarket.

Truck sales volume to-date has mostly been stoked by fleet replacement, which is not necessarily a good thing for aftermarket suppliers as fleets replace out of warranty, high-mileage trucks with fully covered new ones.

But the aftermarket has reaped the benefit of a fleet population hovering at more than 6 years old for quite some time, and a boost in truck population (even new ones) provides some backend benefits.

“I think one important fact with the North American market right now is that up until now or up until recently that’s been a replacement markets. So we haven’t seen any growth in the market,” Volvo boss Olof Persson said last month. “But now we do see a sort of an expansion also into new and expansion of fleets and so on and so forth.”

Just because a used truck is replaced with a new one doesn’t mean it’s gone. Used trucks are in high demand more so than they have been in years. But as the fleet population begins to expand, even slightly, the time will come to re-evaluate the trucks in your trade area.

For example, through the first six months in 2014, deliveries of Mack trucks are up 24 percent in North America compared to last year. Deliveries of Volvo-branded trucks are up 44 percent in that same time frame.

Your customers’ makeup may be changing. And if it’s not changed yet, it likely will soon.

According to the American Truck Dealer’s Association (ATD), “the market for all Class 8 highway tractors is the most ‘normal’ it’s been since before the recession.”

ATD says, by its estimate, order books are full for the rest of year “and we doubt there will be any open slots until at least the end of Q1 2015.”

our definition of normal will vary, but suffice to say ‘normal’ conditions should be a welcome and positive change to your business. The question is, now that you’ve adjusted to a new normal, will you be ready for change?

It’s best to find out sooner rather than later.

Constant evaluation of your trade area will go a long way to ensuring your business is ready to service your customers in their time of need. They’re not going to call you and let you know they just bough five new Mack Titans, but they’re going to expect you to have the parts for them when the time comes.

Right now fleets are in a buying cycle ahead of what you likely planned for. That probably won’t have much of an impact on your business today or tomorrow, but it will sneak up on you if you let it.

It’s always better to ride the tidal wave than to be crushed by it.

Jason Cannon is Online Managing Editor for Truck Parts & Service.

You can follow me on twitter at @By_Jason_Cannon