ARE our industry's parts departments in for some exceptionally strong sales over the next few months or years?
A number of factors seem to be pointing to some good times ahead, not only for aftermarket parts, but for the service department as well.
The devastating downturn that we all experienced a couple of years ago continues to have a major impact on our business, but this time the effects are working in our favor.
The first impact is the structural change to the way truck and trailer customers maintain their equipment. The persistently high unemployment rate that we read about every day includes people who used to work for trucking companies, utilities, and other fleets. Truck and trailer customers relentlessly sought ways to reduce costs — and some decided they did not want to be in the truck and trailer repair business. And if they were not going to fix their equipment as much, they don't need to keep as many parts on the shelf.
At the recent National Trailer Dealers Association convention, a panel of fleet operators discussed the things that they want trailer dealers to provide. One of the most prominent: parts and service. And it isn't just major truckload carriers that have downsized their maintenance operations. This has been a trend for utility and other work-truck fleets for years, and the implication for trailer dealers and truck equipment distributors is obvious. Trailer dealers and truck equipment distributors are the logical place to which fleet customers must turn for expertise in spec'ing and maintaining their vehicles.
As one of the NTDA fleet panelists said, “We are really depending on our dealers now. We are not keeping a lot of parts on the shelf anymore.”
The second impact from the downturn is that it gave us a fleet of old equipment. Few fleets bought trailers during the downturn, choosing instead to operate equipment that normally would have been retired by now. The average age of trailers is at or near record highs. Stu MacKay, another speaker at the NTDA convention, pointed out that there are 3.7 million trailers on the road today — only 28% of which were build in the past five years.
Almost three out of four trailers on the road today are more than five years old, according to MacKay's calculations. Furthermore, more than a third of the fleet is more than 10 years old. Even if many of the oldest trailers are tanks and lowbeds — two trailer types that historically provide longer than average service life, that's still a lot of old equipment on the road — equipment that will need brakes, wheel seals, lights, and other parts.
A third impact of the downturn is the size of the fleet. With many companies going out of business, the fleet has shrunk, and shippers have fewer choices. The result has been that carriers have been operating at or near capacity and at rates that enable truckers to make money.
The FTR Associates Shippers Condition Index continues to point to tight capacity, indicating that trailers are being highly utilized. At this month's American Trucking Associations convention, Chief Economist Bob Costello said trucking capacity should remain tight. The impact for dealers and distributors: More use. More wear. More tear. And more need for parts and service.
One factor could reduce demand for trucks and trailers, but it also works to the advantage of our industry. Customers at some point quit patching and start replacing their equipment. Costello said that sales of new trucks and equipment should continue to be solid “because there's a significant amount of pent-up demand for new trucks to renew aging fleets.”
Who wouldn't mind a mild dip in parts and service caused by an uptick in the sales of new equipment? Life is really great when even the bad news is good.
Our crystal ball doesn't always crystallize really well, but this sure looks like a pretty good time to be in the sales, parts, and service business. What should you be doing now to make the most of it?
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