IHS Automotive forecasts that North American sales of medium and heavy commercial vehicle (MHCV) market will contract by 0.2% in 2016, compared with 11.6% growth in 2015. By 2021, the market is forecasted to see sales of nearly 550,000 units, compared with 533,000 units in 2015 and 478,000 units in 2014.
IHS Automotive Perspective
IHS Automotive forecasts some contraction in the North American medium and heavy commercial vehicle (MHCV) segment over the next several years, compared with double-digit growth in 2014 and 2015. The performance will not be equal across classes, however, as medium trucks (classes 4 to 7) are forecasted to fare better than heavy-duty vehicles (class 8).
While class 8 saw significant growth in 2015, it is forecast that the segment saw the peak of its current business cycle last year. Classes 4 to 7 (medium-duty) are seeing the average age of trucks reach a peak, setting the stage for a rapid replacement cycle. All sectors are being impacted by a driver shortage.
According to the quarterly MHCV North American weight-segment forecast by IHS principal analyst Antti Lindstrom, medium-duty vehicles (classes 4 to 7) will outperform heavy-duty vehicles (class 8) in terms of sales. Classes 4 and 5 will see North American sales growth of 6.0% in 2016, compared with 10.4% in 2015, and see volume exceed 109,000 units. Sales of vehicles in classes 6 and 7 are forecasted at about 134,600 units in 2016, a 9.2% gain. However, the class 8 segment is the reason for the year's overall slight decline.
IHS Automotive has updated its forecast for sales of medium and heavy commercial vehicles (MHCVs) globally, including mixed performances among vehicle classes driving slower growth than during the past two years in the North American Free Trade Agreement (NAFTA) region, including Canada, Mexico, and the United States. While the US dominates the NAFTA region's MHCV market, as it does the light-vehicle market, we forecast that the US will see some share loss from 85.4% in 2015 to 80.6% in 2021, as sales growth slows. Mexico is expected to gain sales share, from 6.1% in 2015 to 9.7% in 2021. In Canada, MHCV sales are forecasted to eat into the US share, with that country accounting for an 8.5% NAFTA market share in 2015 and 9.7% in 2021.
IHS Automotive forecasts the NAFTA MHCV market will see a decrease from the double-digit sales growth rates of 2014 (13.2%) and 2015 (11.6%) over the next five years. In 2016 and 2017, sales are forecasted to be largely flat, while 2018 is forecasted to see a 4.1% contraction. Growth is expected to return in 2021, with regional demand advancing about 3.2%. In terms of volume, unit sales in 2021 will be about 550,000 units, ahead of the volume in 2015 of 533,392 units.
In terms of manufacturers participating in the North American MHCV market, IHS forecasts that Freightliner will continue its dominance, though its class 8 segment sales are forecasted to slip along with the class 8 market. For Freightliner, this is impacting on US production. Freightliner's product mix is forecasted to shift somewhat. While class 8 trucks accounted for 62% of its sales in 2015, this segment is forecasted to shift to 42% in 2021. Freightliner sales overall are forecasted largely to be stable, as the company shifts to increased sales in classes 4 to 7, essentially making up for the reduced volume in class 8. Freightliner is forecasted to hold its 29% North American market share, with the next-closest brands being International, which had a 15.5% share in 2015, and Ford, which had a 13.9% share last year. These three account for nearly 60% of the North American MHCV market. Through 2021, IHS forecasts that International's share is to increase to about 18% of total sales in 2021 and Ford's is to reach 15%. These share gains are forecasted to come at the expense of other, smaller brands, as Freightliner is largely to hold its ground.
Outlook and implications
According to the quarterly MHCV forecast by IHS principal analyst Antti Lindstrom, medium-duty vehicles (classes 4 to 7) will outperform heavy-duty vehicles (class 8). Classes 4 and 5 will see North American sales growth of 6.0% in 2016, compared with 10.4% in 2015, and see volume exceed 109,000 units. Sales in classes 6 and 7 are forecast at about 134,600 units in 2016, a 9.2% gain. However, the giant in the room is Class 8, and that segment is the reason for the year's overall slight decline. Class 8 accounted for 57% of North American MHCV sales in 2015, and it is forecasted to see sales fall 6.1% in 2016. That will pull class 8's share of sales down to 54.2% in 2016, with sales volume falling from about 307,200 units in 2015 to 288,500 units in 2016. Classes 6 and 7 are forecasted to account for a 25.3% share and classes 4 and 5 a 20.5% share of 2016's North American MHCV sales. The decline in the share of class 8 sales is forecasted to continue through the decade, with class 8 sales in 2021 forecasted to be at 52.7% of the market.
The US class 8 segment in 2015 started off with unprecedented thick order books at all manufacturers, and that had an impact on the production expectations throughout last year. However, Lindstrom says that many of those orders were eventually cancelled. Additionally, IHS found that the impact of low oil prices on consumer behaviour was less dramatic than predicted. Furthermore, the lockout at the US West Coast ports caused early stocking of goods well ahead of the holiday season, and combined with the high inventory levels in general, the truck traffic on highways was rather muted in 2015. After a strong start, the traffic slowed down in the second half of the year, and most of the truck buying was replacement purchases, instead of expanding capacity. Other factors contributing to the mellowing of the truck market included stabilisation of trucking rates and reduction in revenue from fuel surcharges − as fuel prices have come down, so too have surcharges, with little room for fleets to increase rates to compensate. Going forward in 2016, class 8 sales are due for a cooling-off period, with very little expansion but rates holding steady, according to IHS analysis. Within the class, sales of tractor trucks are forecasted to take the largest hit, compared with straight trucks, which are forecasted for level sales or a small decline. Class 8 sales as a whole, however, will decline because tractors are such a dominant part of the class and long-haul trucking is seeing as stagnating.
A lack of qualified drivers is taking the largest toll on class 8 long-haul trucking, but it is impacting on the medium-duty classes 4 to 7 as well. In the medium sector, IHS notes that the shortage of qualified drivers is also felt, as well as hours-of-service (HOS) regulations affecting labour supply. Factors affecting performance in this segment include the average age of medium-duty vehicles, which Lindstrom says has reached a peak, leading to the replacement cycle speeding up. These older models are being replaced by new vehicle with up-to-date technology, improving maintenance costs and fuel economy. While maintenance costs overall are expected to remain stable − notable for a segment with thin operating margins − efforts to reduce costs are affecting how the vehicles in these segments are ordered. Trends that Lindstrom has identified include operators having more equipment on the chassis, specifically equipment that can enable drivers to make better use of the vehicle in a variety of situations. Classes 4 to 7 saw sales growth of 9.2% in 2015, to about 226,000 units, while sales in 2016 are forecasted to increase by 7.8%. Going beyond, however, growth will slow and eventually contract. There is general optimism in the sector, with trends from 2015 forecasted to continue to 2106 including popularity of cab-over-engine designs and customers replacing heavy-duty vehicles with medium-duty trucks (an issue also trickling down, with some increase in class 3 vans and cutaways driven by this 'right-sizing' process). The near-term slowing is in part the cyclical recovery running its course and implementation of emissions regulations. "After that, a steady upward trajectory will begin, with a possible hesitation in 2018, before a solid upswing starts in earnest in 2019," said Lindstrom.
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