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Thursday, March 27, 2014

Work Truck Industry Will See Growth, Aging Fleets Updating

The bright outlook for the 2014 economy includes an optimistic view of the trucking industry, which must be prepared to cope with the increased volumes that will arrive with additional consumer confidence and increases in merchandise demand.

The initial challenge for any trucking fleet is a micro version of the challenges the trucking industry typically must face — be certain to have the capacity to move increased volume without over-spending on new transportation to attain that capacity.

The trucking industry in North America is currently experiencing as tight a volume as it has experienced in the last decade. Some industry experts have estimated the trucking capacity to be close to 98%. That percent is dangerously close to not being capable of handling the projected growth. It will also mean higher prices for shipping if trucking companies reach saturation.

The average age of trucks is still relatively high, and it actually went up in 2013, but experts and industry sales professionals believe 2014 may be the year the pendulum swings toward a newer, more modern fleet trend in sales.

The obvious answer is to add more capacity, more trucks. The challenge for trucking companies is when to add new trucks, which equates to added expense and unless the volume is there to justify, it could be a hazardous game of chicken with economic growth.

Adding to the economic growth challenges is an aging fleet that is older than ever before. The older vehicles get, the more challenging and more expensive this becomes. Old trucks are at higher risk of breaking down and have significantly higher maintenance costs than newer vehicles. Despite these facts, the average age of trailers within the industry is increasing. The replacement of older commercial trucks will drive growth in the work truck industry, and the sector will likely keep pace with the economy.

Experts have cited high replacement costs for prohibiting some fleets from replacing older vehicles. If trailers are updated, two old trucks are traded for a single new vehicle to keep operational costs down. This can have a dramatic affect on the ability of heavy-haul trucking companies to meet demand, reducing their overall capacity. Fortunately, technology is providing the solution for the capacity crunch.

Look for indicators such as consumer confidence to push trucking firms to stay ahead of the curve. “Whatever goes on in the overall economy, the work truck sector will be better,” said Steve Latin-Kasper, Director of Market Research for NTEA – The Association for the Work Truck Industry, which recently hosted the annual Work Truck Show in Indianapolis.

The state and municipal fleets that have been restricted from replacing older vehicles will eventually have to step up and order new equipment. Municipal service such as waste collection and road repair equipment must not be allowed to breakdown before initiating the re-order process.

“They have been patching them up, keeping them running, but they can’t do that forever,” Latin-Kasper said. “They need to replace some of their trucks.” It appears 2014 will be the testing ground for where consumer confidence, volume increases and new trucking investment come to a head.