Ryder Sheds Light on Weakening Truck Market

Ryder pre-announced lower 2H15 results, partly on account of “less robust” conditions in the used vehicle markets. Its comments relating to a trailing-off in Sept (in terms of both used tractor volumes and pricing) is consistent with from a recent truck conference, where multiple industry players flagged the sharp deceleration in used over-the-road markets. A widening new vs. used truck price spread acts as a further headwind to the NAFTA market in 2016.

Used truck values had generally moved sideways for the past year or so, and remained at historically high levels. In recent months, though, signs of a softening market have begun to emerge, with US dealer contacts pointing to us about weaker customer traffic and used values. Although, many had defended on the street that the weakness was relatively well contained within the late model sleeper category. Ryder’s pre-announcement raises some questions on this theory as it runs a heavier mix of CL8 fleet, and thus could point to broader weakening.

Some of the order strength that carried into early 2015 was due to large TL operators that were taking advantage of strong used prices and accelerating trade cycles (while recording large gains on 3- yr trade deals). Given recent declines in late model aerodynamic sleeper values, those trades are no longer viable. As such, the market in ’16 will likely feel the void of sales that were “pulled ahead” in to 2015.

Ryder’s negative pre-announcement comes on the back of cautious commentary from certain large TL and logistics providers. After running nearly full-out for much of 2014, the combination of record projected tractor sales and roll-back of Hours of Service regulations has resulted in capacity growth that has outpaced underwhelming freight demand. The resultant loosening in capacity is visible in the downward trend in spot rates, which could put pressure on contract rates (and ultimately truck sales, given historical relationship.)