IT was a crisp November day, the kind you wish you could spend behind the wheel of a convertible, driving through the countryside with the top down.
But despite pleasant temperatures on this particular day, the driver of the car had the air conditioner running and the air flow set on recirculate. Neither the driver nor his three passengers wanted outside air coming through the vents — much less through rolled-down windows.
The reason: he was driving through the downtown area of a bustling Third World city — one that has a population of several million people but lacks the engine emissions regulations that have dominated the pages of Trailer/Body Builders this past year.
There's nothing like a trip to a Third World country to make us realize how far we have been able to come in our efforts to clean the air we breathe. Such trips also help us appreciate the wealth we have in North America, a portion of which we are using to buy cleaner air.
As we reported during the course of 2006, the Environmental Protection Agency's new regulations on diesel exhaust that take effect January 1 will radically reduce the amount of soot and nitrous oxides that will go into the atmosphere. However, they also will add thousands of dollars to the purchase price of a new diesel-powered truck. And in addition to the initial purchase costs, fleets may spend more on fuel to operate the new engines, and fleet maintenance costs are expected to rise.
Are customers willing to pay more for the new technology? Many aren't, at least not right away. According to forecasts presented at NTEA's recent Business and Market Planning Summit and elsewhere, Class 8 truck sales are expected to be down about 40% in 2007. The reason: some customers will run their trucks a little longer than scheduled. Other customers already have their trucks for 2007 — buying them in 2006 to avoid the cost premium they would have had to pay for trucks built after the regs went into effect. This pre-buy of new diesel trucks helps explain the exceptionally strong sales year that many in the industry enjoyed in 2005 and 2006.
Will the lower emissions be worth the additional cost? That is the kind of debate that makes sense only in prosperous countries. In nations where the average person may earn $6,000 per year, paying $7,000 extra for a clean-burning truck does not receive much discussion. For many truck operators in the world, the focus is not on how clean the exhaust is. Instead, truck owners are concerned about how much longer their trucks will last. Can the engine be overhauled again? Can they afford to have it overhauled again?
It's not just the owners of diesel trucks who face these questions. In many countries, exhaust from an array of overworked motor vehicles makes the air tough to breathe. When driven long enough, even mopeds belch smoke.
But here in North America — as well as in Japan and Western Europe — manufacturers are on the verge of producing engines that emit little more than carbon dioxide and water vapor. Unfortunately, the price tag for this technology is enough to trigger convulsions in truck sales, a phenomenon that we have seen throughout this decade.
The EPA already has snugged up diesel emission regulations twice the past few years, and we have another round scheduled for 2010. Both of the previous regulations led truck customers to alter their buying patterns, and we have little reason to expect 2010 to be any different.
The proposed lower limits scheduled for 2010 may have the greatest impact of all. To meet the limits, engine manufacturers will need to use technology that has not yet been finalized and will need to charge a premium that has not yet been determined.
The past couple of years have been historically prosperous ones for our industry. Our sales have been pushed by a strong economy and pulled ahead by the prospect of higher prices in the future.
With the higher prices now here, we are looking for a softer market in 2007, but the downturn may not last long. The consensus among forecasters seems to be that the market will reach a trough in the second and third quarters of 2007, followed by gradual improving conditions in the fourth quarter and beyond. The downturn caused by the 2007 pre-buy is expected to be cut short. Why? Because customers will once again begin buying trucks to avoid the new, tighter emissions regulations scheduled for 2010.
Truck customers are being asked to make a down payment for cleaner air, with predictable results. The market may stink at times during 2007, but we still will be able to drive with the windows rolled down.