Truck dealers: EPA drastically underestimated emissions costs

By Charlie Morasch, Land Line staff writer | 3/8/2012

The Environmental Protection Agency underestimated how environmental rules from 2004 through 2010 affected new truck prices, according to a new study.

Not only did the regulations turn off new truck buyers, but the resistance proved to be counterproductive to the EPA’s agenda of cutting NOx and diesel particulate emissions when truck owners held onto older trucks or used alternatives like glider kits.

“This study shows what can happen when a regulatory proposal seeks to set mandates far in the future, and based on far in advance predictions,” said Dave Westcott, vice chairman of the National Automobile Dealers Association. “Importantly, it documents the real world market disruptions that can occur as a result.”

The National Automobile Dealers Association and American Truck Dealers announced the study’s findings during a teleconference Thursday.

EPA underestimated regulation compliance costs by two to five times, adding thousands to new truck prices and leading to the unintended effect of depressed new truck sales, and increased truck emissions, the study says.

U.S. retail sales of heavy duty trucks neared 500,000 in 2005, but fell to around 200,000 in 2009, the study says.

“As we expected, truck sales literally fell off the cliff,” said Dick Witcher, chairman of American Truck Dealers and owner of an International Truck dealership “Instead of buying new trucks, many operators chose to hold onto their older trucks longer, and willingly accepted higher operational costs.”

Trucks on the road today average nearly seven years old, Witcher said, which is up almost a year older than a historical average that had held steady for 30 years.

Instead of new purchases, truck dealers said the market saw a “surge in truck rebuilding activity, often involving glider kits.”

OOIDA Legislative Affairs Director Ryan Bowley said the study confirms what OOIDA members and other small business truck owners have experienced for years.

“The real message from the trucking community out of the study that EPA needs to pay attention to is there is no way to reliably estimate the cost of the additional technology mandates,” said Bowley, who pointed to EPA’s in-the-works plans to regulate 2019 and newer trucks. “This is viewed by some as a mandate that only affects manufacturers, but if you end up with a $200,000 truck – even the biggest trucking companies in the country are going to be dissuaded from that kind of purchase.”

Small trucking businesses, including companies that don’t receive volume discounts afforded larger motor carriers, absorb every environmental cost, Bowley said.

Truck owners purchase decisions appear to have been driven by two factors, the study said – inflated costs of new trucks that far exceeded EPA predictions and the unreliability of the new technology being rolled out for 2004, 2007 and 2010 standards.

While EPA estimated 2004 through 2010 compliance costs would add an average of $5,136 to truck prices. Surcharges from OEMs averaged between $21,440 for Freightliners to $21,876 for Western Star trucks, according to the study.

Emissions standards rolled out in 2004, 2007 and 2010 combined to drive truck prices upward, the study says. 2004 and 2007 MY engines required stringent diesel particulate standards, while 2010’s NOx-busting standard sent OEM engineers scrambling for workable solutions.

As a result, “truck prices spiked by more than $21,000,” said NADA/ATD’s Esteban Plaza-Jennings, the study’s primary author.

The impact of truck prices, however, pales in comparison to the trust a truck owner puts into purchasing equipment.

“Reliability is especially critical to truck users,” said Doug Greenhaus, chief regulatory counsel for NADA/ATD. “The lost earnings associated with downtime can literally put folks out of business. Agencies take big risks when they set standards far into the future.”

NADA says it represents nearly 16,000 new car and truck dealerships. American Truck Dealers, a subsidiary of NADA, said it represents about 2,000 new medium and heavy-duty truck dealers.

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