CAP: on the implications of Euro-6
Tim Cattlin, Monitor Editor - CVs at CAP, writes:
It’s possibly stating the obvious to those close to all things transport-related, but the introduction of Euro-6 legislation for all new trucks registered from January 2014 is likely to have a significant effect on values realised for Euro-4 and particularly Euro-5 used trucks as we lead up to the new rules becoming law - and indeed afterwards.
Indications from manufacturers suggest that, due to the additional cooling required, cab redesigns will be necessitated, and that the transactional price increase for a new vehicle could run into five figures. This, coupled with the predicted increase in fuel consumption, makes a new Euro-6 vehicle a ‘challenging’ proposition to the operator.
Bite the bullet
Given that the new truck market has been in the doldrums since 2008/2009, availability of late used Euro-5 vehicles was always going to be restricted. These uncertain economic times have led to many operators postponing the replacement of vehicles - but as time goes on, they will have to ‘bite the bullet’ and consider freshening up their fleets.
As we move closer to 2014 and more operators realise the implications of Euro-6, we anticipate that, rather than exposing themselves to the financial burden of the new legislation, many truck operators will opt to hunt down late Euro-5 vehicles. Bearing in mind the already restricted availability of these vehicles, values can only be expected to rise and CAP Monitor has been predicting this trend for some time. It is expected that these enhanced values will remain well into 2014.
There has been activity from some manufacturers in recent months to underwrite short term ‘buy-back’ deals designed not only to stimulate new orders and registrations in a difficult and challenging trading climate, but in particular to generate late plate used stock at around the time Euro-6 is introduced. With manufacturers calculating the fine balance of initial transaction price combined with a sensible residual value to make the deal viable at both the front and back ends, hauliers (with vehicles well overdue already for replacement) who would not otherwise be tempted by such a short-term deal are finding it hard to ignore the temptingly low holding costs offered.
The operator needs to be careful, balancing the short-term benefit with the fact that in two years he will be in the same boat as everyone else, chasing non-existent used vehicles, potentially buying his two-year-old truck from the manufacturer at a price commensurate with what is being achieved in the open market or having to order a new Euro-6 model.
With regard to new registrations, CAP predicts that there will be a burst, if not frenzy, of new vehicles being ordered during 2013 with lead times being extended. Those operators who are slow off the mark may find that manufacturers' Euro-5 order books become full, therefore mandating the move to Euro-6 or joining the many chasing the few used vehicles. Euro-6 registrations are predicted to be extremely slow for the majority of 2014, with levels slowly increasing as acceptance of the new legislation becomes non-optional.