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Class 8 Update: As Economy Builds, Almost Everybody’s Buying

Builders report order upswings of 20% and more, along with gains for proprietary diesels and automated transmissions.

December 2014, TruckingInfo.com - Feature

by Tom Berg, Senior Contributing Editor - Also by this author

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Photo Gallery: 2014 Class 8 Update

These may be the best of times for American truck builders and many of their customers. Orders overall and for some manufacturers are at an all-time high, with Class 8 sales expected to exceed 300,000 this year. And more of the same is predicted for next year.

Fleets, exercising pent-up demand and hustling to haul all the freight they can handle, are buying new trucks to replace worn-out iron. They would buy more if they could find drivers for them. Vocational sales are likewise up substantially as the economy in general and construction in particular have rebounded from the Great Recession.

Many heavy-truck products are fresh or have received new components, and often come standard with telematics capabilities that allow owners to keep close tabs on what their vehicles are doing no matter where they are. Builders are promoting safety technology as a way to cut accidents. Fleet managers report that the latest diesels deliver good fuel economy that helps pay off higher purchasing costs. And while still not perfect, pollution-reduction equipment is more reliable than predecessor models.

One component slowly gaining favor is the 6x2 axle arrangement, where only one of the tandem’s axles is driven and the other is “dead.” On a highway tractor, this cuts weight and reduces parasitic friction because power and torque course through fewer sets of gears. Concerns about traction are addressed with suspensions that automatically send weight from the dead axle to the driven one when the driver locks the differential or when wheel slip is sensed by electronic controls. Because North American operators have long preferred “live” tandems where all four wheels are powered, the 6x2 is harder to sell on a used truck, but that will likely change as word of its advantages gets around, according to a recent industry study.

Some trends continue. Builders are promoting proprietary diesels and integrated powertrains, and they report a strong move to automated mechanical transmissions, or AMTs. Self-shifting gearboxes allow engines to operate efficiently and thus contribute to better fuel economy than manuals. AMTs and full automatics remove much of the work of driving and let drivers concentrate on the road and traffic. They’re easy to learn to operate, and therefore widen the pool of potential drivers from savvy gear jammers to rookies of all demographic backgrounds. The industry’s take rate on AMTs is about 30%, according to builder reports.

A prime example of the above trends is Volvo Trucks. By this year’s third quarter it reported that its own D series diesels went into 92% of all the trucks it builds, and nearly 75% got Volvo’s I-Shift automated mechanical transmission. The 12-speed I-Shift is standard on all highway truck and tractor models, though it’s only available with Volvo engines. The high take for Volvo’s integrated powertrain reflects customer satisfaction with the efficiency and reliability of the products, said Seth Gruber, the company’s marketing communications director. Those penetrations have climbed steadily, compared to about 52% for Volvo engines and 15% for the I-Shift in 2008.

Volvo also offers Cummins’ ISX15 in VN road tractors and Eaton’s manual and automated transmissions in certain models. A small number of customers spec Cummins Westport natural gas engines, which most Class 8 builders use instead of developing their own natural gas power. Volvo has slowed development of dual-fuel and dimethyl ether-fired engines because demand for alternative fuels has waned in the face of lower diesel fuel prices.

Sister company Mack Trucks has made mDrive, its version of I-Shift, standard on the Pinnacle axle-back, its highest-volume highway tractor.

“We’re not where Volvo’s at yet,” said Roy Horton, Mack director of product marketing, “but it’s growing.”

Mack’s own Maxitorque manual transmissions remain popular in construction trucks, and Eaton manuals go in many highway tractors where customers want lower purchase prices. Mack diesels go in a huge majority of its vehicles. The Cummins ISL9 is limited to the Granite MHD and MR low-cabover, and Cummins Westport natural gas engines are used in certain highway tractors and trash trucks.

“Vehicle integration is really driving our success,” said Mary Aufdemberg, director of product marketing at Freightliner Trucks, now the dominant truck manufacturer with a 37% share in Class 8 and 42% in Class 6-7. More customers are taking integrated powertrains using diesels and transmissions from Detroit, the captive component maker under the Daimler Trucks umbrella.

“We’re going to see the continued integration of some components suppliers who partner with OEMs to provide ‘integrated solutions,’” she said. Detroit now has a line of axles that Freightliner and Western Star, Daimler’s premium brand, are encouraging customers to use, along with Detroit engines and transmissions.

Although many manufacturers proclaim a swing to their proprietary smaller diesels, Aufdemberg sees otherwise: “We’re finding that when customers can choose between 13-liter and 15-liter engines, they are selecting the 15-liter, because it delivers the best fuel economy, covers the most duty cycles and has a higher resell value,” she said. “More than 60% of engines in the market now are 15-liter engines – and 65% of those engines are Detroit or Cummins.”

But the smaller engines are a hit with some customers, as we see with the Volvo/Mack’s 13-liter success, as well as that of the Paccar companies, where many buyers take the 13-liter proprietary diesel.

“Kenworth has certainly experienced growth in sales of the Paccar MX-13 engine as customers have developed an appreciation for its fuel efficiency, reduced weight and lower noise levels transmitted into the cab,” said Kurt Swihart, KW’s marketing director. Peterbilt is seeing similar results with the MX-13, said Anthony Gansle, marketing manager for on-highway products. Both have engineered fuel-efficiency packages around that diesel: EPIQ and APEX from Peterbilt and Advantage from Kenworth. The partner for both is Eaton and its Advantage automated mechanical transmission.

Eaton also partners with Navistar International with the Advantage and UltraShift AMTs, and sells those components to most other builders even as their own AMTs have begun squeezing Eaton’s share of the business. Proprietary AMTs have also limited the market for Allison’s new TC10 automatic transmission, which only Navistar International now offers. Caterpillar’s CX31 automatic can be had only in Cat Trucks. Eaton’s UltraShift vocational-series AMTs and manual transmissions are also available in Cat Trucks.

A re-emerging practice is that fleets have begun buying more frequently, something not seen since the heady days of the late 1990s.

“One of the broader trends we’re seeing in the industry, which has certainly impacted the increase in new truck sales, is faster trade cycles,” said Jodi Presswood, vice president and general manager of Navistar’s heavy product line. “New truck buyers in larger fleets would typically trade at four, five or even six years. We’re seeing those trade cycles change to where some customers are trading as early as three years.

Presswood offered a couple of potential explanations. “Certainly, many customers are seeing improved freight levels and freight rates, and are more willing to invest in new technology. But the rapid pace of fuel efficiency improvements across the industry is driving shorter trade cycles as the operating costs and fuel efficiency advantages are too great to be ignored and driving new equipment purchases.”

And some buyers are watching costs carefully. “Large fleets are very sophisticated businesses that understand their operating costs down to the pennies,” said Swihart at Kenworth. “As a result, fleets are increasingly interested in investing in product technologies up front that reduce operating costs down the road. These major fleets are driving many of the product innovations today which are resulting in more technologically advanced truck systems that achieve higher fuel economy, are more comfortable to drive, and are safer on the road.”

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