We sat down with our in-house transportation industry expert Rob Slavin, Senior Valuation Analyst, to get his thoughts on what we saw in the transportation sector in 2022, and what we can expect looking forward.
Heading down the homestretch of 2022, how would you characterize 2022 and do expect any changes in the final months?
This year started out with the best prices the market has ever seen in my 30 years in the business. Strictly from a transportation sales standpoint, Q1 and Q2 total sales were the highest in our company history and Q3 came in 4th place comparing historical sales by quarter. I fully expect sales to be robust through the end of the year. But with that, I expect to see the lowest quantity sold comparing our last 4 years of sales, which is somewhat of an oddity.
We heard a lot about a downturn in the industry this year, is that still happening or did we emerge from it?
I think there is a long way to go before we reach the bottom. The industry has just experienced the high spot rates in Q1, with a good amount of freight to keep drivers busy. Post-Q1, however, we have experienced record-high diesel pricing, record high inflation in 40 years, and parts shortages that prevented drivers getting timely repairs. Also, the amount of freight has continued to drop in the market, imports are down, consumer spending is down, and housing start-ups are down. Those most affected by these trends would be small fleets.
Can you discuss pricing trends we saw in 2022 and what we might see in 2023?
It is crazy to think about just how much fluctuation we have seen in prices. We look at the start of this price escalation on tractors (specifically sleepers) over the course of 5 quarters, beginning in Q4 2020. Back then we saw some equipment jump 150% in value… and to say your 6-7 year-old sleeper rose over 100% was pretty easy. Here’s an example, in Q4 2020, a 2016 Freightliner sleeper with 600,000-650,000 miles was selling for $30,500 on average. In Q1 2021, it rose to $70,600 (131% increase) and then dropped to around a Q3 average of $31,200 (-43%). These have been the most extreme increases and decrease I have seen in my 30 years. With that said, that same 2016 is still getting more money today than it was in Q4 2020 as a 7-year-old truck based on 2023 model year. And with the sharp price increases we have seen on the new truck side, I would expect the market to set a new level of pricing going forward on the expectation of used truck values.
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Are recession fears making an impact in transportation market?
I was interviewed by a transportation publication this year, and they asked if I was surprised by the drop in used truck values. My response was something along the line of “I never expected values to reach the levels they did,” and if you follow the transportation market, you know that it is very cyclical. It can be a constant roller coaster of highs and lows, so I was not surprised; it was expected. The good news for dealers/and auctions is there will always be someone looking to upgrade to a lower mile/newer unit than what they are currently running. And going forward, we still see new truck manufacturers limiting the number of new truck purchases to fleets due to limited production availability. That will help maintain some scarcity in the market of used equipment.
Any other trends you noticed recently in the trucking industry?
I expect to see repossessions start to pick up as small fleets face the number of obstacles I mentioned earlier. We didn’t see any repos in 2020/early 2021, but I think we could see an influx if the market continues to decline.
Within the Ritchie Bros. channels, where have you seen robust sales taking place?
With regards to equipment, the sharpest decline in pricing has been OTR trucks, which makes up the largest population of equipment out in the market. What continues to sell well are the hard-to-find trucks with heavy axles, multiple axles, larger horsepower engines, double frames, equipment used for on/off highway, or severe service application. While much of this equipment didn’t shoot up as high on a percentage basis as the OTR equipment in Q2-Q4 2021 and Q1 2022, it has always sold well at a Ritchie Bros. Auctioneers sale. In terms of what Ritchie Bros. channel has seen the most improvement YOY, it has to be Marketplace-E.
Going back to 2019, our average tractor sold on Marketplace-E was $15,000 in 2020. That jumped to $19,000 in 2021, and then up to $28,000. Now in 2022, through 3 quarters, the average jumped to $43,000. I think in part due to the market, as well as customer finding a source similar to that of a dealership. You find pieces of equipment online, you have as many as 100 pictures and some video, a quality inspection, and the ability to negotiate a price that works for the buyer and seller.
To find out the most up-to-date value of your fleet or truck, you can access our industry-best pricing tool, RB Price Results.