Slow and steady: The positive path ahead for the medium-duty market

ACT Vice President Steve Tam speaks Tuesday at the company’s biannual seminar in Columbus, Ind.ACT Vice President Steve Tam speaks Tuesday at the company’s biannual seminar in Columbus, Ind.

If the new commercial market resembles a roller coaster — with the Class 8 market excitedly shifting up and down at all times — the medium-duty market is the coaster’s staging area. It’s the part of the ride where new passengers board and the coaster slowly gains steam and elevation as it re-enters the track.

There aren’t dramatic highs, but there aren’t terrifying lows, either.

During a presentation Tuesday afternoon at the ACT Research biannual Seminar in Columbus, Ind., Shaun Skinner, president at Isuzu Commercial Truck of America and Isuzu Commercial Truck of Canada, described why the medium-duty market avoids the volatility of its heavy-duty big brother, the how the industry’s consistency gives Isuzu and other medium-duty players encouragement looking into the future.

Skinner says Isuzu attributes the medium-duty market’s stability to its wide range of customer segments and urban and final-mile delivery uses. Skinner says medium-duty trucks aren’t exclusively used to haul freight, they also are outfitted for work in construction, refuse, commercial utilities, municipalities and other markets. The medium-duty market “isn’t reliant on any one segment,” he says. But he does add medium-duty industry’s connection to final-mile delivery is growing. The rise of e-commerce and growing urban population density is making it increasingly difficult for large Class 8 trucks to complete deliveries in North America’s most populated areas. And with the fuel economy advantages provided by medium-duty trucks, committing a heavy-duty tractor-trailer to final-mile delivery isn’t a logical financial decision in any marketplace.

Skinner says the medium-duty market has challenges ahead — he notes emission and safety regulations and the uncertainty of the electric vehicles as two biggies — but, as a whole, he and Isuzu are confident that steady growth appears likely for the market in the coming years.

Steve Tam, vice president at ACT Research, agrees.

Following Skinner’s presentation, Tam says the Class 5 to 7 market is up 23 percent year-over-year through July and has a three-month order backlog. Tam says that year-over-year percentage has slipped since a huge order month in January, but overall the industry is still “running right on target” with his production forecast for the year.

Tam says about 75 percent of new medium-duty truck orders can be traced to replacement demand. Other factors pushing sales in 2018 include population and utilization needs and Skinner’s references specific segment needs.

“We’re going to be around 260,000 to 265,000 [new medium-duty trucks] in North America this year,” Tam says.

When looking past 2018, Tam echoed the sentiment shared by his colleagues from earlier in the day, saying he isn’t forecasting a recession that will damage the medium-duty market in the immediate future, but warns spot recessions could hit specific industries and cause mild positions of weakness.

When comparing medium-duty to its more unpredictable big brother, Tam says, “they cycle together, but the magnitude of those cycles is much different.”

Finally, touching on medium-duty’s last-mile potential, Tam says that market is a high-stakes game with incredible potential. He defines last-mile delivery as “the delivery of goods to the point where it is going to be consumed or transitioned to the consumer.”

Quoting stats from FedEx, UPS and USPS, Tam says last-mile delivery adds hundreds of millions of delivery points to the national freight industry. He says that means that while Class 8 truck sales are on the rise, medium-duty sales are growing even faster, and are taking a larger share of the new truck sales across the overall marketplace.

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