Heavy Trucks Will Carry The Load As Freight Hits Record Highs

BMI View: Medium and heavy duty truck demand will be driven by road freight growth of 5.1% in 2014 and average annual growth of 5.9% over the 2015-18 period. Truck sales will grow 5.3% in 2014 and average 3.7% over 2015-18 as consumers buy in advance of new emission standards.

In line with our view that strength in the freight transport sector will drive growth in demand for medium and heavy trucks in 2014, truck sales posted their best results for May since 2006 as freight levels also achieved new highs. We forecast total medium and heavy truck sales to grow 5.3% to 370,379 units in 2014, pushing the market closer to the 400,000 unit mark last seen in 2005.

Total medium and heavy truck sales grew 5.6% year-on-year (y-o-y) in May, marking the ninth consecutive month of growth. For the first five months, total sales were up 12.6% y-o-y, led by the heaviest trucks of Class 8 with growth of 12.1% y-o-y. This aligns with growth in truck tonnage, which according to the American Trucking Association (ATA), is up 2.9% y-o-y for 5M14.

Freight Sector Driving Truck Sales Growth
US Heavy Truck Sales And Road Freight Growth

Heavy Trucks Will Carry The Load As Freight Hits Record Highs

BMI View: Medium and heavy duty truck demand will be driven by road freight growth of 5.1% in 2014 and average annual growth of 5.9% over the 2015-18 period. Truck sales will grow 5.3% in 2014 and average 3.7% over 2015-18 as consumers buy in advance of new emission standards.

In line with our view that strength in the freight transport sector will drive growth in demand for medium and heavy trucks in 2014, truck sales posted their best results for May since 2006 as freight levels also achieved new highs. We forecast total medium and heavy truck sales to grow 5.3% to 370,379 units in 2014, pushing the market closer to the 400,000 unit mark last seen in 2005.

Total medium and heavy truck sales grew 5.6% year-on-year (y-o-y) in May, marking the ninth consecutive month of growth. For the first five months, total sales were up 12.6% y-o-y, led by the heaviest trucks of Class 8 with growth of 12.1% y-o-y. This aligns with growth in truck tonnage, which according to the American Trucking Association (ATA), is up 2.9% y-o-y for 5M14.

Freight Sector Driving Truck Sales Growth
US Heavy Truck Sales And Road Freight Growth

The growth in US manufacturing, which is generating demand for road haulage of goods between factories and end users or ports and railways for export, will see this growth story continue for the remainder of the year and indeed our forecast period to 2018. BMI's Freight Transport team forecasts road freight tonnage growth of 5.1% in 2014, followed by average annual growth of 5.9% for the 2015-18 period.

We expect this to be reflected in truck sales with positive growth for the five-year period. However, we expect slower rates of growth for 2015 and 2016 as the replacement cycle winds down, but with a further pick up in pace for 2017 and 2018 before the next round of fuel efficiency standards for medium and heavy trucks are implemented for model year 2018.

This means we will also see a shift in the types of trucks being purchased. Emissions regulations are prompting a shift toward alternative fuels for truck fleet operators since the first phase of standards came in for model year 2014. The favoured alternative so far is compressed natural gas (CNG), which supports our view that abundant reserves make CNG the most viable alternative in the US ( see 'Is Gas The Natural Alternative For Vehicles', October 23 2012).

The move is made more practical by the support of major industry player such as Cummins, the country's biggest heavy-duty engine supplier, which has produced CNG engines, and truck makers such as Volvo, Freightliner and Peterbilt offering CNG models. In 2013, natural gas trucks (including liquefied natural gas) accounted for just around 1% of total heavy truck sales, but the increased availability of vehicles and fuelling stations will see this increase over the forecast period.

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