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Friday, March 24, 2023

North American Trucking Industry on Cusp of Class 8 Replacement Cycle

A new study by global consulting firm Frost and Sullivan of the North American Class 8 market projects that a strong equipment replacement cycle should begin between 2014 and 2015.

According to a report by Fleet Owner, the trend could create somewhat of an oversupply of used Class 8 equipment, which could drive valuations marginally lower over the next several years.

“Our research suggests the equipment replacement cycle peaks every fourth or fifth year, thus suggesting that 2014-2015 will be the next cycle peak ahead of a broader economic upturn in 2016,” Sandeep Kar, global director of commercial vehicle research for Frost & Sullivan, explained to the trade magazine.

That upturn will also drive an increase in sales of both new and used Class 8 vehicles across North America as well.
Wallace Lau, a trucking industry analyst with the firm’s global commercial vehicle research practice, noted although used truck valuations are poised to decline slightly over the next few years, OEMs are expected to put more focus and resource into the used market going forward.

Another trend concerning Class 8 used truck valuations highlighted in the report:

For starters, Lau said used truck values are highly dependent on several key factors –model year and type, total mileage, engine displacement, and transmission type are the major ones – but geography also has an effect.

“For example, used long-haul tractor models are lowest in cost in Canada and the U.S. Northwest as the harsh cold weather erodes their longevity. However, the highest valuations are found in the California and U.S. Rocky Mountain region as trucks in that area typically feature the most desired specifications.”

Kar believes continuing consolidation within the trucking market will lead many carriers to keep more of their used iron “in house” to support growing ranks of owner-operators signing on to their fleets.

“Owner-operators and smaller fleets will still be the major drivers of used truck demand,” he added. “That’s because the durability of trucks keeps improving – keeping TCO [total cost of operation] expenses down – and they still are not comfortable with the higher sticker prices for new trucks due to mandated 2010 emissions control technology.”