Replacement activity for older commercial trucks will drive growth in the work truck industry, and the sector will outpace the overall economy thanks to uneven business and consumer confidence, trade industry executives said here.
"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 hosted the annual Work Truck Show during March 4-6. A key reason, he said, is the rising age of commercial trucks still on the job — especially within state and municipal fleets that have been restricted from replacing older vehicles.
"They have been patching them up, keeping them running, but they can't do that forever," Latin-Kasper said during a March 4 session. "They need to replace some of their trucks."
The inactivity is rooted in government-imposed limits on how fleets can spend their budgets, he said, despite a broad increase in tax revenue around the country.
"They are dealing with mandates to deal with debt first, which is why they are not spending," he said. "And they took on a pretty big pile of debt." He doesn't expect states to get out from under most of that debt until 2015.
"Some aged vehicles are working their way through the system to this day," NTEA Executive Director Steve Carey said, speaking about the overall work truck industry. "Vocational fleets are looking at multiple solutions and trying to match to the application — looking at fuel source, driver training and the application when making choices."
Latin-Kasper added that while the average age of commercial trucks nationwide has increased, he believes that will level off. "The average age of trucks is still relatively high, and actually went up in 2013 versus 2012, but we think that finally stops in 2014," he said.
More broadly, he said the overall economy is being held back by shaky consumer confidence, which in turn is holding businesses back from spending. This is despite consumer debt-to-income levels that have markedly improved since the recession that closed out the last decade, Latin-Kasper added.
"The ability to spend is there – what is missing is the attitude to spend," he said. "There has been a consolidation of debt on the part of consumers and businesses, but consumer confidence remains kind of low. Businesses are just waiting to spend cash on hand but won't until consumers get back out there. And that won't happen in 2014."
For this year, Latin-Kasper forecasts "slow but steady growth. It will be up and down, quarter to quarter."
Despite the tepid outlook, the work truck industry is "certainly in a better place than we were three or four short years ago," Carey said. While unemployment is higher than what "most of us want to see," he noted that businesses are taking a cautious approach to hiring.
"There is a lot more discussion about bringing in the right people," he said. "We're hearing that a lot of times there seems to be a disconnect between the skill sets businesses need and the available people."
Still, he noted that a recent survey of NTEA members indicated that they are adding staff. Carey said that since July, 46% of respondents have added staff, 43% have remained constant and 11% have decreased. He also noted that manufacturers are "bringing plant capacity back online consistent with the recovery. And there is good correlation between [order] backlogs and returning capacity."
