Aftermarket

Fleet Survey: Expansion Plans Lag Freight Growth

December 07, 2010

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A new survey of fleets finds that carriers are shifting to more aggressive equipment acquisition and replacement plans.


That's according to Transport Capital Partners' Business Expectation Survey for the fourth quarter.

"These acquisition plans are principally replacements for aging fleets, but expected freight volume increases have acquisition plans ramping up modestly," said Richard Mikes, TCP partner. In this survey, 40 percent said they would acquire (or replace) more than 10 percent of their fleet this quarter, compared to 30 percent in the last survey.

"Most carriers have not purchased new equipment for some time and the pool of used equipment has been diminished by exports and scrapage while fleet utility is picking up" noted Lana Batts, TCP Partner.

Almost 27 percent of carriers plan to replace 11-25 percent of the fleet, compared to 24 percent who planned to do so in the spring. More significantly 13 percent plan to replace 26 percent or more of their fleet compared to only 7 percent last spring. Factors that have contributed to the shift include: an improved profitability outlook, the desire to replace the aging fleet, the lack of used equipment, and the rising value of trade-ins.

Smaller fleets, however, aren't so likely to be looking to replace trucks; 62 percent of those surveyed expected to replace less than 10 percent of their fleets.

Trailers also look to be less likely to be replaced that tractors. Two-thirds of the carriers say they plan to replace less than 10 percent of trailer fleets. Very few respondents indicated replacement plans for over 26%. Comments from carriers indicate that if hours of service regulations change there may have to be more trailers purchased as the economics of "drop and hook" may favor higher trailer/tractor ratios.

Replacement Rather Than Expansion

While carriers appear ready to replace an aging fleet, they have less appetite to expand their fleet capacity, according to the TCP analysts. Fewer are planning capacity increases than a quarter ago, with 41 percent saying they have no plans to add capacity, up from 34 percent last quarter, while a quarter of the carriers plan to add only 1 to 5 percent.

"Carriers have stifled expansion appetites because of increased equipment costs, looming driver shortages, and poor financial returns," Mikes said.

Of those that say they are expanding, the most common method cited was through independent contractors. However, this was down to 21 percent from 28 percent just a quarter ago. "Essentially this means one-fifth of the carriers who plan to expand intend to do so by changing the color of the checkers on the board, and not by buying more checkers," said Batts.

Over two-thirds of the carriers said they expect credit availability to remain the same. Thirteen percent of the under $25 million revenue carriers expect credit to tighten over the next twelve months compared to only 4% of those with revenues above $25 million.

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