NTEA member survey findings suggest slow growth for 2019

This article was published in the May 2019 edition of NTEA News.

The last year brought great success to the work truck industry. Demand was high, translating into strong commercial vehicle sales. This activity came with challenges — both planned and unpredicted. Companies faced extended lead-times, workforce shortages, new regulations, changing customer expectations, steel and aluminum tariffs, and more.

In reviewing corporate/marketing plans for 2019, you may find it helpful to consider results of NTEA’s member survey regarding business conditions. This study provides relevant market data to guide strategic planning efforts, keeping membership apprised of

  • Sales levels and quoting activity
  • Backlogs
  • Production capacity
  • Employment levels
  • Key factors influencing member business
  • Upcoming challenges and opportunities

This article summarizes latest survey results, integrating data from previous research initiatives for year-to-year comparisons and directional trends. The next survey will be emailed to distributor and manufacturer members in February 2020.

Results summary
Fifty-seven percent of respondents are distributors, and 43% manufacturers. Annual sales range from less than $2 million to more than $70 million, with the largest group representing $10–20 million (17%). More than one quarter list the Midwest U.S. as the primary region of company operations. Nearly 30% have 21–50 employees, while 27% have more than 100 staff members. Survey data indicates strong sales volume and business activity.

In 2019, at least half of respondents plan to sell flatbed and stake bodies; toolboxes; lights, warning devices and cameras; liftgates; and service bodies. Least reported product categories include bus bodies, ambulance/responder/fire and waste bodies.

The majority of survey participants indicated sales activity in most of their primary application markets remained the same relative to the previous year. Construction, government/municipal and utility/telecom application markets stood out in terms of increased significance. Segments reflecting the most year-to-year stability were transportation/warehousing, courier and agriculture, respectively. Agriculture came up again as the sector with the sharpest decline in significance, followed by retail trade and oil/natural gas/mining. In the last year, the highest reported percentage of total sales went to the government/municipal and construction application markets, respectively. Not surprisingly, in terms of total sales, respondents listed government/municipal, construction and utility/telecom as the three most important sectors for their businesses moving into the current year.

Eighty percent of respondents registered higher sales in 2018 relative to 2017, while levels were unchanged for 8% and lower for 12%.

Sixty-four percent anticipate business gains in 2019 — matching the improvement expectation in 2017. Since 2018, there was an 8-percentage point increase in those predicting a decline. This data aligns with anecdotal evidence pointing toward continued growth in 2019 but at a slower pace than the previous year.

Sixty-six percent noted more quoting activity since July 2018. Twenty-eight percent said levels stayed flat, and 6% indicated a decrease.

Nearly 60% of participants reported increased employment since July 2018 — a return to the 2015 level. Ten percent acknowledged a drop. On average, respondents would like to increase welders by 7%, assemblers by 7% and sales team by 4%.

Ninety percent of participants are dealing with business backlog — a 14-percentage point jump from the 76% recorded in 2018. More than 40% of those with backlog noted an increase since July 2018, while levels remain unchanged for 49%.

Twenty-eight percent with backlog say it amounts to 30 days or less; the time horizon is 30–60 days for another 28%, 60–90 days for 17% and at least 90 days for 27% (a substantial increase from the 17% reported last year).

More than 80% of reporting companies have little to no ability to increase workload above current capacity, without a significant business expansion or merger. None are functioning below 50% capacity.

Factors affecting business
Commercial vehicle businesses must navigate a complex set of market dynamics. Distributor and manufacturer perspectives are outlined in Figures 8 and 9.

Implementing process and workflow management technologies and systems has the most positive affect on distributors, followed by internet sales. Lack of skilled employees has the most negative influence, with chassis pools and ship-thrus a distant second. Distributor respondents are most neutral toward providing alternative fuel conversions; limited access to premier product lines; meeting Federal Motor Vehicle Safety Standard (FMVSS) requirements; and fleets and buyers requiring greener trucks or alternative fuel solutions.

Manufacturer respondents consider process and workflow management technologies
the most positive influence, followed by internet sales. Lack of skilled employees is the most negative dynamic, trailed by chassis pools/ship-thrus and Environmental Protection Agency/air quality/Occupational Health and Safety Administration requirements. Providing alternative fuel conversions, limited access to premier product lines and meeting FMVSS requirements are not as impactful.

Industry challenges
Almost three quarters of survey respondents view hiring skilled employees as a current industry challenge. In addition, more than half noted chassis availability as a concern. Global economic uncertainty and federal government financial and regulatory policy were other prominent topics noted. (Totals are not equal to 100% due to respondents’ ability to select multiple answers.)

Seventy-seven percent consider finding and retaining qualified talent to be the biggest issue facing their company today. The higher cost of doing business and access to truck chassis create significant problems for more than half. (Totals are not equal to 100% due to respondents’ ability to select multiple answers.)

Success drivers
The overwhelming majority of survey participants see the trend toward industry consolidation progressing. Evaluating business growth opportunities, most popular tactics include being selective on jobs taken to maintain higher profit margins; expanding product offerings or product lines; developing an employee recruitment and retention strategy; and focusing on a specialized niche market. Least common strategies include expanding exporting activities, focusing on alternative fuel and green truck products, and being a low-cost provider. (Totals are not equal to 100% due to respondents’ ability to select multiple answers.)

Inflationary pressure
In the 2018 calendar year, survey respondents assessed the inflationary pressure experienced across several categories. Sixty-five percent registered inflationary pressure higher than 5% for materials — not surprising given recent tariff activity. Forty percent noted inflationary pressure from healthcare exceeding 5%.

Looking ahead
Survey respondents identified a variety of business enhancement ideas on their radar this year. These involve aligning new products with current demand; entering new markets; expanding facilities; finding new long-term customers; focusing on niche markets; obtaining increased government funding; merging with a related company; and simplifying sales channels and product offerings.

Major roadblocks to member company growth include adequate capital to grow and weather a downturn; chassis availability; finding and retaining employees; increased tariff and transportation costs; market stability; competition; and worker productivity.

For questions or more information on this survey, contact Joy Knesnik, NTEA senior communications manager, at joy@ntea.com.