2027 Regulations May Drive Earlier Sales
In economics, there is a term called a “perverse incentive”, where an action or policy causes a different, or sometimes even opposite, effect than intended. The quickest example of this is requiring a word count in an essay, only to have a student use filler words such as “this is a very, very, very, very, important issue” to reach that word count. FTR believes that incoming regulations may just have a similar effect on truck sales as fleets scramble to avoid the wrath of the Environmental Protection Agency (EPA).
Details
Generally speaking, trucking regulations follow a grandfathering rule, where trucks made before a certain point are exempt until they are unfit to drive anymore. Such is the case with the 2027 regulations set by the EPA, called EPA Phase 3, which includes a requirement for 40% of all heavy-duty trucks made from 2027 to 2032 to be zero-emission. FTR Commercial Vehicles Senior Analyst Dan Moyer says that this, combined with the fact that zero emission vehicles are still much more expensive than diesel counterparts, leads him and his organization to believe the industry is set for a surge in sales for the 2026 model year, the most advanced technological trucks that are unhindered by the emission reduction requirements.
To that end, FTR predicts production levels of 280,000 and 352,000 for model years 2025 and 2026, respectively, but says that “If that [the increased purchasing due to changes in future regulations] is happening now, it’s not being reflected in the market indicators yet. And we don’t really expect it [for 2024],” he said.
Conclusion
Beyond truckers trying to mitigate the increased costs of complying with stricter regulations, an alternative is that a change of which party is in charge of the presidency may cause the EPA to nix the current regulations in favor of something more lax. This may just be the reason why Moyer does not expect the surge to happen just yet, as there is a chance EPA Phase 3 does not happen at all
It will be interesting to see if this prediction by Dan Moyer and FTR comes to fruition, as 2027 looms ever closer and will be here sooner than we think.
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