The heavy-duty sector is an interesting one for the tool and equipment distributor. On one hand:
- When looking at the number of vehicles in weight classes 5 to 8, they’re significantly outnumbered by those considered to be "light" vehicles in weight classes 1 to 4. Estimates show about 215 million registered light vehicles. This is in contrast to the nearly 8.5 million medium and heavy-duty vehicles currently on the road.
- Less rubber on the road means fewer shops and technicians (a.k.a. customers) servicing these vehicle types.
- Gas prices hit this sector much harder than light automotive. Obviously their GPM is worse, so they spend more on fuel. As of press time, the national averages for unleaded gas and diesel fuel were $2.33 and $2.54, respectively. The fleet market, which includes corporate and municipal vehicle fleets of all weight classes, spent over $10 billion on fuel in 2005.
- There are distributors specializing in heavy-duty repair. The largest of which is FleetPride. Although their primary focus is parts, they do get into tools. This company has also established their own chain of repair facilities, called FleetCare.
On The Other Hand:
- Heavy-duty technicians are typically better trained and better paid, so they not only have more to spend, but they’re not as transient as those in the light automotive sector
- The shops are typically much larger and the products they need are more expensive.
- Heavy-duty vehicles are more maintenance-dependent than passenger cars and trucks. Because they last significantly longer, maintaining these vehicles is incredibly important.
- Dealerships are also service outlets, so keeping an eye out for signage promoting Mack, Freightliner, Cummins and Volvo can help in identifying sales opportunities.
- Not all fleets are solely heavy-duty shops. Many corporate and municipal fleets include vehicles from weight classes 2 and up. Offering tools that can be used on a wide range of vehicles will allow you to achieve greater shop penetration from a stable and well-paid customer base.
- Providing tools for servicing heavy-duty automotive vehicles can lead to involvement with other market segments, such as construction and agriculture. After all, 1" sockets work just as well on semis as they do on bulldozers and combines. If they're fixing one, they may also work on the other, especially if it's an independent shop.
There are also a number of similarities when looking at light and heavy-duty automotive technicians and shops:
- Just like light automotive, heavy-duty vehicle dealerships are trying to take over service by limiting access to tools and information. Providing specialty tools and diagnostic equipment for heavy-duty vehicles allows you to be a source in solving their problems.
- Another similarity includes a significant shortage of qualified technicians.
- Heavy-duty technicians have a vocational training background, much like many of their brethren on the light side. So the benefits of brand awareness and loyalty can be realized by tapping into these votech programs as well.
Buyer's Market
So there's the good, the bad and the ugly of heavy-duty repair, but one of the most critical elements, and the real driving force behind this market's fluctuations, are new vehicle sales. Due to their large appetite for fuel, and diesel fuel in particular, the emissions regulations placed on medium and heavy-duty vehicles are more stringent, and have a significant impact. More specifically, we're talking about changes to the engine.
This story really begins in October, 2002, when the EPA registered new emissions regulations that would take effect in 2004. This resulted in buyers taking one of two directions.
- Buying a vehicle before 2004 without a new engine technology that could drive up vehicle costs and lead to dealing with the usual kinks in servicing and operating a new engine type.
- Investing in parts and service that could extend the life of their current vehicle, and allow it to last until the next emissions update hit.
Both actions benefited the heavy-duty market ... for a while. Vehicle manufacturers realized gains from a spike in sales, while suppliers and repairers benefited from more dollars being allocated for maintenance.
Either route is good for the tool dealer. More services being performed translates to the availability of more tool-purchasing dollars, and new technologies mean new products are needed to keep pace.
But that was nothing compared to the reaction to similar regulations taking hold in 2007, which represent a 90 percent reduction in emissions from the 2004 standard. In response to these more stringent guidelines, annual sales of class 8 vehicles have increased nearly 75 percent since 2003, and could double by the end of this year.
The downside, for people like Mack and Freightliner, is that following these sales and production spikes are periods of significant drop-off. The EPA, however, should keep this roller coaster going, as another set of emissions standards are set for 2010.
Although the ups and downs of new vehicle sales will continue to impact this marketplace, the heavy-duty and fleet customer base is a good one to tap. Not only will your business benefit from the constant need to service these vehicles, but also from the relative stability and size of the shops that need your tools and equipment.
