The usual focus in the auto industry is on passenger cars. This is where the consumers are, but it only tells a fraction of the mobility story. I mean, look at the average U.S. highway: you see plenty of big trucks -- semis moving all manner of goods. Worldwide, heavy trucks are an important business, so the recent announcement that Volvo AB has named a new CEO should give us an opportunity to consider where the truck industry is headed.
It's headed in a good direction, because as essential as it is to move people around, it's arguably more important to move freight. Think about it: we could lose almost all personal cars on our roads and still need trucks, just to supply our food requirements. The market for heavy trucks has been depressed for the last few years, just like everything else. But that's going to change in 2011:
- Consumers will come off the sidelines in force. The recovery may still seem fragile, but there's a little something called "pent-up demand" that has to eventually kick in. Plasma TVs. Washing machines. Sofabeds. These are all items that people have been putting off buying for, um... years. And at some point, wants do legitimately become needs. The laptop expires. The old washing machine dies. All these goods and many more are moved around the country by truck. Once manufacturers ramp up production and start filling orders, the stuff has to move out of warehouses and off loading docks.
- Falling unemployment means rising food budgets. During the recession, people looked for places to slash budgets and one of the first places they looked was the fridge. Again, food is transported from farm to processing facility to grocery store to pantry by heavy truck. As the ranks of the unemployed return, however slowly, to the workforce, stores will see an uptick in food shopping, which translates into a need to stock shelves more often.
- Countries are replacing old trucks with new, fuel-efficient models. Volvo developed a hybrid garbage truck for the European market in 2008. Many other heavy truck-makers are looking at offering, if not hybrid models, then at least more fuel-efficient, lower-emissions vehicles. In the U.S., the heavy truck industry is actually going to be required to meet more stringent emissions standards in the near future, so it's investing now. Over time, big shipping companies will recognize the savings they can accrue by upgraded, so they'll begin to replace inefficient trucks in their fleets.
- Relocation will become a reality again. A dismal real-estate market has forced people to stay put, even though the jobs may be elsewhere. But as housing recovers, many homeowners will jump at the first chance to sell. This means work for moving and storage companies, who are good customers for heavy trucks.
- Imports and exports will pick up. The flow of goods in and out of international ports will intensify as the world economy recovers. Giant container ships transport this stuff across oceans, but heavy trucks move it from the ports to intermediary warehouses to its ultimate retail destinations. Any increase in Wal-Mart's (WMT) profits means that the big box giant will demanding more goods from China. But U.S. manufacturing will also be sending goods to the rest of the world. And the journey will begin on a big truck.