Despite what should be a hangover period, dealerships still are reporting brisk business.
Nearly 70 percent of dealerships responding to a 2019 Trucks, Parts, Service reader survey rated their company’s 2019 performance “slightly” (2 to 10 percent) or “significantly” (more than 10 percent) better than 2018 results.
Only 26 percent of respondents reported 2019 company performance below 2018 results, with 8 percent reporting no change.
When asked to rate their company’s 2019 performance to date versus their projections, the numbers were tempered a bit.
The amount of dealers who rated their company’s overall 2019 performance “slightly” or “significantly” above projections was 51 percent, while 31 percent reported 2019 performance “slightly” below (23 percent) or “significantly” below (8 percent) below projections. One-fifth said performance was equal to projections.
The top concern by far when it came to selling new trucks was that prices are too high, with 56 percent, followed by training sales associates at 22 percent. The overwhelming concern about used truck sales at 67 percent of respondents was falling vehicle values. The next biggest concern was customer financing, at 17 percent.
The used truck market was strong for Hunter Truck in 2018 and that carried into the first quarter of 2019.Hunter Truck set a record for revenue gross sales in 2018. The dealership followed that up by being up nearly 19 percent in the first two quarters of 2019 and up about 10 percent in the third quarter, setting itself up for another record year.
“But as our costs increase and with the market slowing a bit, that has driven our margins down. Even though we’ll have a record in revenue [in 2019], our margins won’t be as great as the previous year,” says Jeff Hunter, president and CEO.
Part of Hunter Truck’s success can be attributed to New Jersey resolving funding issues for construction contracts.
“Now it seems like the whole state of New Jersey is under construction. That has been really good for us. The construction market is better than 50 percent of our business,” Hunter says.
The used truck market was strong for Hunter Truck in 2018 and that carried into the first quarter of 2019 when values started to drop, Hunter says. “It hasn’t slowed us down but we’re being cautious,” he adds.
Hunter Truck sells Peterbilt and International, and it has 21 locations throughout Pennsylvania, New York, New Jersey and West Virginia. Hunter says sales were strong for both brands.
Another reason for Hunter Truck’s success is diversification, offering a variety of truck types. For example, in 2018 the company focused on the refuse business.
“We’re stocking a lot of garbage packers … and we’re doing very well at that,” Hunter says. “With Peterbilt investing a lot of money in its new 520 product, we had dabbled in it with some local companies and then we decided to go after all the companies. The product is very well-accepted in the market.”
For Palmer Trucks, 2018 was a year of responding to strong market activity.For Palmer Trucks, a Kenworth dealership with locations in Illinois, Indiana Kentucky and Ohio, 2018 was a year of responding to strong market activity and paying the necessary attention to operational practices to meet that market activity, says Jacob Nichols, director of corporate operations.
“In 2019, we have worked to improve internal systems and processes in order to become more profitable and efficient, which was previously overshadowed by the volume of business requiring constant response in 2018,” Nichols says.
Palmer Trucks is benefiting from the strong economic climate. “Construction as well as public works project volumes have helped the business thrive,” he adds.
Greg Schuttenhelm, vice president and chief operating officer, TEC Equipment, says 2018 was a very strong year for TEC Equipment with record equipment demand, adding that 2019 remains strong despite an overall softening in the market.
“Owner operator business has decreased [in 2019] with the drop in spot rates, but medium to large fleets are still very active and placing orders. There doesn’t seem to be a large difference between the five states we operate in,” says Schuttenhelm. TEC, which sells Mack and Volvo trucks, currently has 26 locations in Washington, Oregon, California, Nevada and Arizona.
In the face of a softening market, TEC is in a growth mode.
“We have made significant investments in both facilities and people during the last year. TEC is completing construction on two new dealerships, one in Dixon, Calif., and the other in Redmond, Ore. Additionally, TEC has either purchased land or is in the process of purchasing land in at least three other locations,” Schuttenhelm says.
The sale of new trucks was “outstanding” in 2018 and 2019, says Jerry Kocan, dealer principal, Four Star Freightliner, which has seven locations in Alabama, Georgia and Florida, offering Freightliner, Western Star and Mitsubishi Fuso.
In the face of a softening market, TEC Equipment is in a growth mode.He says the sale of used trucks is down in 2019 and it’s primarily 3- to 5-year-old sleeper models with more than 500,000 miles on them. However, he says, the company fortunately doesn’t have many of these on its lots.
Dealer Principal Tim Fyda says 2018 was a “banner year” for Fyda Freightliner company-wide. Fyda says 2019 was relatively flat by comparison but, “historically still a great year and we’re very pleased.”
Fyda Freightliner built dealerships in Walton, Ky., and Zanesville, Ohio, over the last few years — areas that have been previously underserved, Fyda says. “Both have stayed busy and filled a niche the industry needed.”
The sale of new trucks, whether they’re Freightliner, Western Star or Isuzu, has slowed the last six months of 2019 — and that’s across the company’s seven locations in Kentucky, Ohio and Pennsylvania. However, the sales numbers are still on par, Fyda says.
“On the other hand used truck values have taken a big decline, which has affected the used truck inventories and the used truck market,” he says.
Used sales aside, Fyda is pleased with the overall performance of the dealer group.
“If you look at the industry as a pie, the pie has gotten bigger and Freightliner’s share of the pie has gotten bigger. I would attribute the growth to those two things,” Fyda says. “And certainly we have to handle the growth in volume and uptime requirements of customers. We’re intently focused on uptime and that has created more demand for our services.”
All Fyda Freightliner locations have express assessment, which provides customers with an evaluation of their truck within two hours. “If it’s a quick fix we repair it quickly and if it has to go into the queue, then it does. Express assessment has really brought on more business and more efficiency,” Fyda says.
New trucks sales were good in 2018 and “steady” in 2019, says Korey Neal, president, K. Neal Truck and Bus Center, a four-location operation in the Washington, D.C., metro area that sells Class 4-8 International, Hino, Isuzu and Mitsubishi Fuso trucks as well as IC Bus, Diamond and Collins buses.
Neal says the dealership’s order board going into 2020 isn’t the same as 2018 and 2019, but “we’re a heavy municipality dealership, and municipalities typically buy in good and bad times because [the truck purchases are] government funded.”
Neal adds the company is facing the aftermath of the new truck buying spree in the form of increased used truck inventory.
“We’re seeing compression in pricing in the used truck market, nothing outrageous in the Class 5-7 market, but there are a lot of used trucks available to customers right now, and that is something we’re cognizant of,” he says.
Consolidation and Internet-driven competition were also notable the past couple of years, according to Neal.
“We’re noticing a lot of consolidation. Companies that had six or seven trucks are being bought out by the 50-truck guy,” he says. “That can be good or bad. If you have the customer that is getting purchased by a company not buying your brand, that’s not a good thing. But if you have the customer buying a company not driving your brand, typically you put yourself in a better position to sell more trucks.”
More customers are using the Internet, Neal says, which has its pros and cons. On one hand, customers have much more information at their fingertips making it easier for them to research multiple dealers to get the best deal.
“The more information you have, the more power you have. They’re able to shop dealers against each other a little bit easier,” he says.
“However, I truly believe an educated customer is a better customer for us because we’re able to have better conversations … and when we’re able to align good products and services with what the customer needs, you get a better overall customer experience,” says Neal.
(Editor’s note: Part IV of the TPS State of the Industry report takes a look at dealerships’ views of the performance of their parts and service departments.)
