Even though Canadian sales of new medium-duty and heavy-duty trucks fell to their lowest point in recent years, with only 27,141 vehicles sold in 2009, the market is showing signs of recovery with 38,923 units sold in 2013. But it still has a way to go to return to the pre-recession peak sales of 52,293 trucks in 2006, according to a recently conducted review of the Canadian heavy-duty aftermarket industry by DesRosiers Automotive Consultants.
According to the report, employment in the truck transportation industry rose to near-pre-recession levels, with 406,111 employees in 2010 compared to 415,065 before the downturn in 2007. While parts and accessory wholesalers have seen a general decline of their workforce over the past four years, the number of parts and accessory stores has been on the rise after a decrease from 2009 to 2010.
Before this report by DesRosiers, the aftermarket relating to heavy-duty trucks suffered from a serious lack of available data. This initial report by DesRosiers represents a first attempt to profile the industry and to place a dollar figure on the size of this market. While the data collected is far from comprehensive, it is intended to represent a starting point from which further, more detailed analysis can be built in the years ahead.
According to the report, in 2009, a total of 29.7 billion kilometres were driven by class 3 to class 8 trucks. The average class 3 to class 7 medium-duty truck averaged 16,483 kilometres per year, while the average class 8 truck averaged 65,701 kilometres annually. Though more recent data on kilometres driven is unavailable, diesel consumption data provide some insight into truck usage. Diesel consumption in recent years has exceeded pre-economic downturn figures, and diesel sales are up 6.3% over their previous 2008 peak.
Across classes 3 to 8, there are a total of 1,394,237 vehicles in operation in Canada. According to provincial data, Alberta has the largest population of trucks in operation with 354,659 class 3 to class 8 trucks, followed by Ontario and Quebec.
Industry replacement plans for heavy-duty trucks provides insight into the future outlook for the aftermarket. According to a 2013 survey, 49% of for-hire carrier firms had plans to replace at least 10% of their class 8 trucks, providing a strong positive outlook.
Since a formal metric for tracking the size and growth of the heavy-duty aftermarket demand does not yet exist, DesRosiers Automotive Consultants Inc. (DAC) has developed two estimating methodologies. By studying repair and maintenance expense data of truck transportation firms from Statistics Canada, they were able to estimate and track the repair habits of truck transportation establishments in Canada. These expenditures totalled $3.18 billion in 2013, comprising $1.32 billion from local trucking and $1.86 billion from long-distance trucking. The $3.18 billion figure spent by truck transportation firms in 2010 does not, however, capture the entire picture of heavy-duty trucks, as it only considers the aforementioned segments. For example, maintenance and repairs of trucks owned by construction, cement, logging, or oil companies would not be captured in this figure. This is clearly an area where additional data collection will be required in the future.
The second market-sizing estimating method developed by DAC relies on survey data from Canadian truck maintainers. Using this data, DAC has calculated the market size for medium and heavy-duty truck maintenance for class 3 to class 8 trucks at $5.66 billion. This comprises $1.79 billion for parts demand, $2.24 billion for labour associated with the aforementioned parts, $229 million for engine oil, and $1.4 billion for tire replacement demand. As this is only a starting point, more work will be done in future studies to hone this estimate.
DesRosiers says the heavy-duty aftermarket has recovered at a steady pace over the past few years. By estimating aftermarket size with replacement demand of all heavy-duty trucks in operation, there is now another metric available to help gauge the health of the industry in the subsequent years.
As class 8 is a major segment in the industry, understanding the anticipated replacement plans for these trucks can provide insights into the outlook for the heavy-duty truck aftermarket. After the downturn in 2008, many truck operations chose to delay the replacement of their class 8 fleet.
Forty-three percent of for-hire carrier firms had no plans to replace any of their trucks in 2009. Similarly, only 27% of owner-operator trucking companies had replacement plans regarding their trucks in 2010. While replacement plans are slowly gaining momentum, the decision to operate these heavy-duty trucks over a longer time frame has positive implications for the aftermarket.
Unless companies are prepared to take a capital loss upon scrapping these trucks, it is logical that they repair and maintain them, which extends their replacement cycles. In the interval, there should be a higher-than-average growth in demand for repairs and maintenance from the heavy-duty truck market.
Combined, the six classes of heavy-duty trucks in operation in Canada total 1,394,237 units. Class 8 and class 3 are by far the largest population of heavy-duty trucks in operation in Canada. Class 8 leads with 576,810 vehicles in operation, and class 3 follows with 388,872 units.
The age of the majority of the 1.39 million heavy-duty trucks in operation in Canada is 10 years or more. The 10-years-plus age group of these 703,190 vehicles makes up 50.4% of the entire population.
Trucks between six and 10 years of age comprise 29% of the group, with 404,042 units in operation. The newer trucks (between one and five years) form the smallest population amongst the age groups and include 287,005 trucks in operation.
Alberta has the highest number of heavy-duty trucks in operation by province, with 354,659 units, followed by Ontario with 338,017 and Quebec with 250,779 trucks. Alberta and Ontario together form 49.7% of the entire national fleet in operation.
The size of the heavy-duty market is an important metric in tracking the health of the industry. As a formal metric for tracking the size and growth of heavy-duty aftermarket demand does not currently exist, the next most accurate evaluation at this time is derived from two estimating methodologies. Tallying the repair and maintenance costs of truck transportation establishments provides a measurable metric that tracks the repair habits of the owners. The caveat with this estimation, however, is that it does not track the entire population of heavy-duty trucks in operation. An alternative methodology to the trucking industry estimation is the analysis of replacement demand for heavy-duty trucks in operation. A more complete picture of aftermarket demand in the heavy-duty truck segment can be arrived at by adding replacement part, engine oil, and tire demand.
Repair and maintenance costs for truck transportation establishments steadily increased in the 2009-2010 period. The 2.9% growth in costs represents a $178.9 million increase in the estimation. According to estimated truck transportation figures, the size of the aftermarket was $3.18 billion in 2010. The demand for replacement parts reached $1.79 billion in 2012 and, combined with engine oil and tire replacement demand of $229 million and $1.4 billion respectively, aftermarket demand for heavy duty trucks amounted to $5.66 billion in 2012.
The three- to five-year overall outlook for the heavy-duty truck aftermarket is largely positive, though it involves a number of potential risks. From a structural standpoint, the market appears robust in the short term. Indeed most of the risk is of a cyclical nature. Assuming a slow and moderate growth in the Canadian economy, the heavy-duty truck aftermarket should remain solid.
Whatever the economic outcome for the years ahead, it will be important to continue to monitor and track the size and structure of the market. This report represents a firs
t step in profiling the industry and in establishing a benchmark to which future data can be compared.
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