Truck dealers and aftermarket parts distributors hopeful

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Parts and service sales leveled off a bit but equipment sales are beginning to show life, according to responders of the most recent Trucks, Parts, Service business conditions survey related to COVID-19.

Responders to our most recent survey, the eighth conducted by TPS since the coronavirus pandemic began in March, also report that while current sales levels remain well below pre-March levels and early predictions for the year, optimism continues to grow in the dealer and aftermarket channels that the third quarter and months ahead will see a return to sales levels more in line with industry averages. This year has no chance of being the best ever, but hopefully this optimism leads to a second-half rebound that also keeps 2020 from being the worst year ever.

Among aftermarket parts and service operations, 76 percent of responders to our most recent survey stated their sales totals remain down from the outset of the pandemic. That was 2 percent higher than our prior survey but well in line with data we’ve received from the industry in the past three months.

Responder outlook remained hopeful for the weeks and months ahead. Nearly two thirds of responders indicated they anticipate parts and service sales to increase (58 percent) or increase significantly (6 percent) in the next month. Those numbers jump even higher to 64 percent for increase and 6 percent for increase significantly in the third quarter. Only 3 percent of responders anticipate parts and service sales will continue to fall in the third quarter.

“We have seen an uptick in business over the last two weeks,” said one parts and service responder. Another says business appears fluid. “There are times we are very slow as well as bursts of days we have repairs.”

Overall, TPS responders indicate parts sales have been hit slightly higher than service revenue by coronavirus, though 42 percent of responders note their parts and service sales have fallen equally over the prior three months. Additionally, 27 percent of responders expect the two segments to rebound equally, while 36 percent expect parts sales to come back faster. A bit of bad news comes from the 18 percent of responders who don’t believe they will recover their losses in either segment.

That level of resignation is more common in the dealer channel where, despite slivers of optimism for equipment sales in the third quarter, sentiment is generally negative.

Only 7 percent of new and used truck dealers responding to this week’s survey admitted to sales growth for equipment since COVID-19 crashed into North America. Not a single trailer dealer said business is up. A third of new truck dealers and 47 percent of used truck dealers are anticipating sales increases in the month ahead, but considering the depths to which sales have fallen, an increase in sales on its face does not indicate a rebound for the market.

That said, dealers finally appear ready to consider business could get better in 2020. That’s a belief that hasn’t been shared by responders in many previous surveys.

More than half (53 percent) of new truck dealers and 47 percent of used truck dealers are anticipating sales growth in the third quarter. Trailer dealers are equally optimistic, with 75 percent of new dealers and 50 percent of used dealers predicting sales growth in Q3.

Said one truck dealer, “Activity is coming back but we will be be off 25 percent for the year.”

For our TPS survey question asking responders to rank business conditions last week on a 1 to 10 scale, (with 1 being the worst week ever and 10 being the best), dealer responders continued to trend upward but still remain behind their parts and service counterparts.

Dealers pegged the period in which our survey was conducted (June 9-17) at a 5.22, well above the 4.43 they had given the prior survey period. When looking at the week and month ahead, dealers averaged a 5.94 and a 6.00 — both far and away the highest totals provided during our eight weeks of surveys.

In the parts and service space, last week checked in at a 5.71, with the week ahead earning a 6.17 and the month ahead a 6.37.

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Survey responders in both markets acknowledge their predictions for the months ahead lack the mathematical certainty they could provide in a non-pandemic year, but considering the minefield the industry has navigated over the past three months, just seeing steady increases in sales and freight volumes is enough for many to be hopeful.

One parts and service responder acknowledged the prior week was the second best in their company’s history. Another said though sales revenue is only slowing trending upward, when coupled with growing employee morale and the reopening of the economy, “I would say things are improving.”

No matter how business does respond, responders in both channels recognize their businesses have forever changed, and how they navigate the months and years ahead will depend on how they adapt to new market expectations. Several parts and service responders point to supply chain management as an area where changes appear imminent.

“I believe having a shorter, more controllable supply chain will take preference over a longer, less expensive one — for the short term anyway,” said one responder.

There’s also the matter of customer confidence. How will customers want to be serviced in the years ahead? Responders admit they aren’t sure. It will be a while before everyone is able to move on. Said one responder: “Getting back to normal will depend on others getting back to normal themselves.”

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