OEMs Soften Blow Of 2007 Price Hikes

Expect to pay $5,000 to $10,000 more per vehicle.

New 2007 emissions-controls will affect on price, fuel economy and maintenance costs for new vehicles, but, come January, sticker shock among new truck buyers will not be as bad as originally thought.

“There was definitely a lot of talk that the costs would increase to buy new trucks because of the new technologies and that fuel economy would degrade,” says Gary Petty, president and CEO of the National Private Truck Council, Alexandria, VA. “The reality is better than was expected a year ago. Companies were probably wise to over-estimate rather than underestimate.”

Sticker prices for most 2007 trucks will be $5,000 to $10,000 higher per vehicle. But, because most manufacturers have just expanded on systems that they first started using in 2002, when the last round of emissions reductions went into effect, rather than developing new technology from scratch, the blow to the customers’ wallets will be far less than expected, they claim.

All but one manufacturer has turned to exhaust gas recirculation (EGR) as the primary method for reducing nitrous oxide emissions by 55 percent, as required under the 2007 standards put forth by the U.S. Environmental Protection Agency. Diesel particulate filters will be used to reduce by the required 90 percent the amount of soot and particulate emissions.

Caterpillar Truck Engines, Peoria, IL, is the one exception, expanding its ACERT technology, which relies on a series of turbochargers to force more cool, clean air into the combustion chamber. The company has “invested more than $1 billion in research and development for ACERT and other clean diesel projects to help our customers meet today’s standards, and future regulations,” says Doug Oberhelman, Caterpillar’s group president.

At International Truck and Engine Corp., Warrenville, IL, for example, incorporating updated EGR technology into the new trucks will translate into price increases of $5,000 to $6,000 for mid-range diesel trucks and $7,000 to $10,000 for Class-8 vehicles. Additional charges may apply with some engines where higher horsepower will require dual exhaust after-treatment.

Detroit Diesel Corp., a subsidiary of Daimler Chrysler and part of the Freightliner Group, estimates that its engines with 2007 emissions reduction technology are likely to raise the price of a typical Class 8 vehicle by an average of $6,638. Detroit Diesel supplies engines for many vehicles in the Freightliner stable, which include Freightliner, Mercedes Benz, Western Star, Sterling and Mitsubishi Fuso.

Volvo Trucks North America, Tampa, FL, is adding a $7,500 technology “surcharge” to its new 2007 models to offset costs of meeting the new emissions standards.

According to Scott Kress, Volvo’s senior vice president of sales and marketing, the company “has made a very substantial investment in developing not just engines, but complete vehicle solutions to meet the 2007 standard. That technology has tons of costs behind it.”

Columbus, IN-based Cummins, which supplies engines for the Freightliner Group, Volvo, International, Ford, Kenworth, Mack and Peterbilt, anticipates similar increases.

In anticipation of the new regulations, truck manufacturers have also gone—and continue to go—to great time and expense in field testing their new engines prior to their launch next January.

Throughout the development of the new engines, International has been focused on achieving comparable performance to what its customers see today and is conducting some of the largest field tests in its history to help achieve that goal, according to Phil Christman, vice president of product creation at International. Tests seek to gain data on power levels, fuel economy, durability, reliability and maintenance levels and will include extensive winter and summer testing over millions of miles.

At Detroit Diesel, Tim Tindall, director of emission projects, says engine modifications will not impact performance. “The improved design enhances airflow, yields a cleaner combustion cycle, helps increase fuel economy and provides the driver with better load response and acceleration.”

Fuel economy is not expected to take a hit, either, with most manufacturers anticipating no more than a 1 percent drops in mileage. Peter Karlsen, president and CEO of Volvo Trucks North America says his company’s engines “will deliver fuel economy equivalent to our current engines.”

Maintenance Costs To Increase
According to the new regulations, diesel particulate filters will need to be cleaned of ash deposits roughly every 150,000 miles. Those cleanings will cost about $150 each, and most manufacturers are debating whether to subsidize dealer efforts to purchase the required cleaning systems or to set up central cleaning services within their companies.

Most companies agree that the new engines will likely increase other annual maintenance costs by $350 to $400 per vehicle per year.
But one maintenance issue that could pose a problem is under-the-hood temperatures, as the new systems are expected to raise engine running temperatures. This will place a strain on air conditioning, intake and cooling systems.

After 2002, the last time the EPA imposed stricter engine requirements, Index Sensors & Controls, Stanwood, WA, an engine temperature and pressure sensing technology provider, reported that trucking fleets saw “premature failures of air conditioner compressors and clutches after less than a year.”

No matter what the new engines will do, though, with a little less than a year to go, they are definitely right around the corner. There is not much that fleets can do to prevent higher costs, and tax incentives to help defray some of the anticipated price increases seem all but dead, but there are a few things fleet managers can do to soften the blow.

One option is to rebuild or retrofit existing trucks with the new technologies. The costs to do that are estimated at between $15,000 and $18,000 per vehicle, according to industry experts.

Many others have engaged in a pre-buy of current 2006 models. Truck makers and industry watchdogs alike expect 2006 sales to be very high as more and more fleets stock up now. In January, orders for new Class-8 trucks in North America reached an all-time high of 43,100 for a single month, according to American Commercial Transportation (ACT) Research, Columbus, IN.

Any pre-buy, though, will not have lasting effects on the overall industry, according to NPTC’s Petty, because of increased demand for trucks across the country. “The pre-buy in ’06 will affect sales early on in ’07, but there will be a greater demand for vehicles with the country’s continued economic growth,” he says. “The momentum of the truck market alone will carry the industry beyond any increases in price or backlash.

“The industry will continue to evolve into even higher emissions standards as we move to 2010, and in probably about three or four years, we’ll have trucks whose exhaust is cleaner than the air that they’re releasing into,” he concludes.