California rules increase truck sales — and prices
Clean air regulations enacted in California are boosting truck sales in northern Nevada — and raising pricing on big rig tractors.
The California Air Resources Board is requiring operators to phase out older-model semi trucks to reduce pollution from diesel trucks, so trucking and transportation firms that serve California are upgrading their fleets with CARB-compliant rigs. And those rigs have hefty price tags because of enhanced emission systems that capture noxious waste emissions.
Tractor costs run between $120,000 and $160,000. However, in the last two to three years, the cost of a new tractor has risen $9,000 to $12,000 per truck to be compliant with CARB regulations, says Brad Meyer, president of NevCal Trucking in Sparks. NevCal does brisk business hauling shipping containers from the Port of Oakland to northern Nevada.
NevCal has been adding about 20 new trucks the past few years, but due to increased costs the trucking company will only purchase 12 this year. The company has about 90 trucks in its fleet, Meyer says.
“It’s been on the rise for a while because of all the new regulations and laws,” he says. “They have got to put more equipment on the truck and more sensors and all that stuff, and anytime they do that the price goes up. The pricing increase is just the cost of doing business to stay in the market we are in.”
Jeff Lynch, president of ITS Logistics in Sparks, says tractor costs have increased 10 percent since 2010. Most of the added cost comes from a revamped diesel exhaust system that recaptures soot from emissions, and the addition of a nitric oxide scrubber. Truckers note that the exhaust from the new systems emits cleaner air than what’s being drawn in.
Companies based in northern Nevada that run their rigs in California have had little choice but to buy new tractors to upgrade their fleets, says Jack Colpo, sales rep for Peterbilt Truck Parts and Equipment Company in Sparks. Though trucking operators can opt to install an emissions filter costing between $16,000 and $25,000, the trucks using those filters will be obsolete in another eight years under CARB regulations. Most buyers elect to invest in a new tractor, Colpo says.
“Truck sales have been very good over the last 12 months,” he says. “Temper that with fact that if you want to run in California, there are new laws that have come out that require new trucks.”
Meeting those requirements has boosted the price of a Class 8 heavy-duty vehicle $9,250 since January 2007.
While many larger trucking companies buy new equipment, smaller owner/operators choose to install emissions filters, especially if they are more than halfway through the service life of the vehicle’s engine, Colpo notes.
Clint Capurro, president of Capurro Trucking, purchases about 25 new trucks per year between Capurro Trucking, GE Specialized Transport and HARCO Trucking. The extra equipment can add as much as $250,000 annually in capital expenditure — or about the cost of two more trucks, Capurro says. The new tractors also bring added maintenance costs and reduced fuel mileage due to the added weight.
“We live so close to California that we are buying new to come into compliance with California,” he says. “We have to follow CARB rules because we do a lot of business in California and go back and forth across the state.”
Cleaning out the collected soot and particulates from the new emissions systems adds another $2,000 to $3,000 annually in costs, he says. The company has had to increase its prices to customers to offset the rise in new truck prices.
NevCal’s Meyer also has boosted shipping costs to offset the added expenses associated with new tractors. As a result, he’s lost some business to lower-cost alternative carriers based in the Bay Area that received state subsidies to upgrade their equipment, he says.
He’s also focused on running internal operations more efficiently, and he works to match up export and import customers to run trucks more economically.
“We are trying to run more loaded miles and cut the trips it takes to make it over the hill,” he says. “We have people who want to export, and we have people importing, and we are taking lot of different work with our partners so our export and import customers can maximize on their runs.”
The push to upgrade trucks running to and from California has impacted the resale market for tractors as well. Resale values remain strong, Meyer notes, but many older trucks are being resold in Midwest and East Coast market. Many are headed to overseas companies.
“They are all prepared to be our future leaders and decision-makers and will see first-hand the complexities of a growing and industrious region,” says Chamber CEO Ann Silver.