Connectivity has raised the bar about what fleets expect when they bring their trucks into the dealership for service, says Rick Reynolds, president and dealer principal at Peach State Truck Centers and ATD/HDT/Procede Software Truck Dealer of the Year. “They expect that we should be able to diagnose the problem quicker, and with that quicker diagnosis communicate with them about what is occurring throughout the repair,” he says, adding that their expectations are “very legitimate and realistic.” He sees one of the benefits of connectivity as eliminating waste and adding as much efficiency as possible.
John Arscott, CEO and dealer principal at The Pete Store and ATD/HDT 2018 Truck Dealer of the Year finalist, agrees that communication is huge but adds, “Somebody might have put a bracket around uptime and put it up on a wall, but it has always been important.”
He says today it is “more about developing a service culture that includes trust, efficiency, and communication. Those three components need to work together, with communication being the biggest one.”
Jon Vandehey, president and CEO of Mid-State Truck Service Inc. and Truck Dealer of the Year nominee, believes connectivity gives his dealership the “opportunity to problem-solve with our customers and form a relationship with them. It is also another area where we can differentiate ourselves and provide additional value, because it allows us to be involved earlier in the decision-making process.”
Craig Young, president of Young Truck Sales Inc. and another Dealer of the Year nominee, says connectivity speeds up the repair process, but he adds that not all his customers like the additional communication. Some, he says, see it as an interruption to their business. He also cautions that it is imperative that the diagnosis of the problem be accurate. “You find a sensor that is bad and fix it. Everything seems okay, but 100 miles down the road the truck has a problem again.”
He says this raises the issue of how far a technician should go with the initial repair. “You get a code that tells you what the problem is and you fix that, but what if there is actually something else that is causing the problem to occur but it does not show up right away? That is frustrating for the customer.”
According to Lee White, president of Old River Companies Inc. and a Truck Dealer of the Year nominee, increased connectivity puts pressure on dealers to complete repairs faster, but also lessens the interaction customers have with dealership personnel, because they often get notification of problems directly through OEM programs rather than through the dealership.
To combat the complications connectivity brings, nominee Mark Bergey, president of Bergey’s Truck Center, has added an aftermarket specialist to his staff. “He goes out and helps our customers understand all the different programs and applications so they can leverage what’s out there.”
Nominee Joe Alosa, president and CEO of New England Kenworth, believes one of the challenges facing dealers today is “getting the proper people in place to handle and disseminate the information to the customer in a timely fashion so he knows whether he is going to be tied up for five minutes, five hours, or five days.”
He adds, “It is important that I instruct our people that there is no such thing as the word ‘no’ when someone calls for service support, because he has the right to know whether he is in trouble for a day or for a longer period of time.” Alosa says this is especially true in his market areas, because New England Kenworth customers tend to be smaller companies that don’t have standby or replacement units available.
The Dealer of the Year candidates made note of two significant spec’ing trends. Vandehey says, “One is geared toward safety and the other is geared toward the driver.”
Arscott says the biggest driver-related change has been the move to automated transmissions. “Over the last 24 months Peterbilt has gone from about 10% AMTs to 60%.” He says he is seeing this move in his vocational customers. “We saw it before in trash trucks, but now we are seeing it in dump trucks and ready-mix trucks.” He believes this is in part a reaction to the driver shortage and fleets adapting to a driver pool that includes people with no experience driving a standard transmission.
Young says customers are interested in more luxurious interiors and more driver amenities. “It is what they need to attract drivers,” he believes.
When it comes to safety, Reynolds says he has seen “a tremendous reception and adoption of safety systems.” White agrees and adds that dealers should work hard at selling customers on the benefits of advanced safety systems. He is such a big believer in them that he even specs them on his dealership’s rental fleet.
But AMTs and safety are not the only spec’ing trends dealers notice. There has also been a move to integrated powertrains, according to Arscott. “We are talking about vertical integration with ‘talk’ between components, and that is going to benefit the customer because those systems are designed to work together,” he explains.
White says he has noticed a shift to smaller-displacement engines, specifically 13-liter engines. “For the most part, today’s 13-liter engines with their torque and horsepower are equivalent to what 16-liter engines used to be, so there is no reason not to go with a smaller-displacement engine.”
“There is also the whole aerodynamic and fuel economy issues,” Bergey says. “Years ago, all fleets wanted was heavy horsepower. Today, they are more concerned about fuel economy and in spec’ing the truck that will get them the best fuel economy.”
He adds that fleets expect the dealer to be the expert who ensures they maximize the truck for fuel efficiency.
Keeping up with disruptive trends
Platooning, autonomous, trucks and electric-powered trucks are just a few of the things that have been identified as bringing major disruption to the trucking industry. We asked the nominees what they are doing to stay on top of these trends and to put themselves in a position to be sources of information for customers.
“Everyone is trying to figure out the next big thing and how it is going to affect them and their business,” Vandehey says. “We are actively involved in trying to figure that out and adapt to it and hopefully at some point embrace it.”
Dealers are not united as to which technology they think will come to market first.
White says autonomous trucks are getting the most interest from his customers because of the driver shortage situation. “But neither my customers nor I see a driverless truck any time soon, because there still needs to be a lot of changes in state and federal regulations. We are just trying to make sure that everyone at the dealership is up to speed on what’s going on in the industry. We are trying to learn all we can so that if our customer asks a question,we have a good answer for them.”
Arscott says he has already had many conversations with customers on market disruptions. He relies on his OEM to show his customers the advanced technologies it is working on, so he routinely takes customers to the Peterbilt factory to meet with company officials. “The first autonomous vehicle I was involved with was six years ago. And since then, OEMs have been playing with it and have been fairly open about showing customers what they are doing. The implementation of this is coming down the pike. At what point it will be here, I am not sure.”
He adds, “These technologies [autonomous and electric trucks] are going to change the world, but it might not be quite at the lightning speed that the [smartphone] did.”
Reynolds says he is intrigued by all the new technology. “The Tesla and Nikola presentations are all very positive. Concerning electric vehicles, it is interesting to read about them and I think there is a place for them in the industry. However, I don’t have my arms wrapped around the Class 8 piece of that equation simply because it is still so new and there is so much to work through as far as battery weight, range, etc. But I do see it in the pickup and delivery market.”
He says he is going to continue to watch developments to stay on top of things. “The other issue to be aware of with electric trucks is those things run on fewer parts and parts that don’t break. There is an aspect of that that could significantly change the business model for commercial truck dealers. I have no idea what that would look like, but the simple fact of the matter is that there will be fewer parts to break.”
Young has customers who have already placed orders for Tesla and Nikola trucks. “We are on the verge of a real revolution in our industry,” he says. “But I think we are wrong thinking of the Nikolas and Teslas as truck manufacturers. To me, Tesla is a battery company and Nikola is a power company.”
He believes acceptance of these products will start out slowly in the trucking industry. “It will be slow, slow, slow – and then it will suddenly boom. That is where I see us now; we are at the very start of that process, and when it hits and takes off, those who aren’t on the leading edge will be left behind.” His plan is to be on the leading edge.
Trump administration and trucking
With the presidential administration promoting business-friendly policies, we asked if these dealers have seen any impact during Donald Trump’s first year in office. (HDT spoke to the dealers before the new tax bill had been passed.)
“I think without any question our customer base is astutely aware of the change,” Alosa says. “I don’t know if it actually is going to be better, but they just feel that the business climate is better. Whether that is real or perceived, they will act accordingly, which means they are buying products and they are optimistic.”
Reynolds thinks what would have a real impact on trucking would be the passage of an infrastructure improvement bill. “If an infrastructure bill gets passed that allows for building and improving the nation’s infrastructure, that will kick into a whole different dynamic as it relates to our vocational markets.”
Arscott believes in keeping his head down and focusing on his people and his customers. “What happens in Washington will happen. I certainly write letters and do what I can to support the industry, but I don’t waste a lot of mental and emotional time worrying about it, because it is what it is.”
Young says business is good, but “I don’t know much credit the president should get for that. I do think that some of the changing and loosening of regulations has been beneficial for business.”
However, the pending renegotiation of the North American Free Trade Agreement has raised concern for some of Young’s customers who are involved in the auto industry. He believes that uncertainty has stopped some customers from buying new trucks as they wait to see how the issue is resolved.
The state of the used truck market
The used truck market in 2017 was characterized by slow sales and low prices. Arscott thinks the situation is stabilizing now and that “the free fall is over,” although he adds “prices are not coming back up a whole lot.” Still, he believes customers are more aware of the situation with used trucks and are more accepting of it, so he does not see it as “dragging us down as it did last year.”
Bergey says he has scaled back on the number of used trucks he keeps in stock and only carries those that are right for his market niche. “We are not going to be in all models. We are focusing only on our brands.”
Alosa notes that the used truck market for over-the-road trucks and that for vocational trucks can be quite different. “In the vocational market, prices are up, at least in our area. We see very little fluctuation from month to month and year to year in the value of vocational used trucks.”
Young does not see the used truck market having an impact on new truck sales, “because the advancements in the new trucks, the mileage improvements, and the increased comfort levels that are needed to attract drivers will outweigh the low used-truck residuals.”
The year ahead
When we interviewed the nominees late in December, we asked them to comment on how they thought business would be in the year ahead.
“Our order board is filling up nicely for 2018,” Bergey says. “I am very positive about that.” His optimism is due in part to the fact that all the OEMs he represents have come out with new products for 2018. “That is exciting for us, because it gives us a lot to talk to our customers about.”
If the end of 2017 is any indication of what 2018 will be like for New England Kenworth, Alosa says things will be “rocking and rolling.” The last few weeks of the year saw what Alosa calls “a beehive of activity” as businesses were looking for trucks. “We had products in inventory and that is what they are looking for. They are optimistic for the foreseeable future. I see only good stuff based on what our customers are saying and the buying trends of the last month of 2017.”
Young expects the next several years to be good “as long as the economy keeps its current base line. In addition, most of my customers are realizing that they need to update their trucks, so I am looking for a good year overall.”
Arscott, too, is looking for a good year. “We have a pretty strong backlog right now and I am bullish about our products and the mix in the markets we span. Plus the used-truck situation is starting to fade into the background a little bit. There is confidence out there. No one [is] whining about their business being bad. Fleets are concerned about getting drivers and are saying they have more business than they can handle.”
Reynolds indicates that several of his dealership’s large customers had already placed orders for 2018. “Orders at this time are above the level they were at last year. I think 2018 will be better than 2017, but I am not ready to say it could be better than 2015, which was a great year. A few things have to happen, like meaningful tax reform and a solid infrastructure bill. If that happens we could be looking at a very, very healthy market in the next year.”
White is optimistic but adds, “If the driver situation was better nationwide and if customers were not seeing a loss in their used trucks when they go to trade them in, we would see an unbelievable boom.”
Vandehey expresses similar concerns, saying, “The driver shortage is the single factor limiting or retarding future growth. Our fleets might be replacing trucks, but they are not growing trucks because of the driver shortage.”