Interim T-4 Might Mean More Than You Initially ThoughtBy Kim Phelan
Article Date: 01-01-2011
Copyright(C) 2011 Associated Equipment Distributors. All Rights Reserved.
Depending on your inventory, this new era could trigger a bit of a seller's market.
So here we are again looking at the proverbial road ahead - at least we're not looking down the barrel of the not-so-proverbial shotgun that we faced in 2009, or the tunnel light of 2010, which some feared was a locomotive.
Results from our annual Business Outlook survey give me an opportunity to see glimpses into the minds of AED members as they write in extra comments after answering our questions - a number of these messages are included in the Outlook story beginning on page 30. It intrigued me to read notes about the federal government and the urgent need for infrastructure investment, deficit paydown, and pro-business tax policy. And it pained me to read a handful of bitter summaries about California's dismal business conditions for equipment distributors.
Overall, the consensus among economists and industry analysts I have followed seems to be that recovery will come slowly to the U.S., and from the middle of the country spreading outward toward the coasts - it's just hard to believe it when so many can't feel it yet.
Nevertheless, I see a fair amount of collective optimism among a majority of survey respondents. I'm not certain whether it's altogether based on solid evidence or some combination of facts and gut-feelings, but there is one rather obvious yet nebulous threshold into which our industry is now crossing, which may be cause for more optimism than some dealers have perhaps recognized. It is alluded to in the very briefest of all those survey write-in commentaries I received: Its writer simply stated, "We are very optimistic for 2011 - [but] Tier 4 is the unknown."
In other words, what will be the impact of Interim Tier-4 emissions regulations on the business results of equipment dealers in 2011?
As a matter of fact, we asked that question in our survey, and to be honest, I anticipated something quite different from the unenthusiastic shrug of the shoulders we got in response. I suppose it's just me, but it sure seems odd that 55 percent of dealer respondents are saying that this new regulation will have "not much" impact on their service business in 2011, and even 14 percent saying it will not impact service at all.
What's equally puzzling is that 58 percent of respondents say that the new iT-4 off-road emissions regulation will have "not much" impact on the equipment sales side of their business, and 18 percent say "not at all." Maybe everyone's not looking at this the same way.
Now I confess, I had some help gaining my new-found appreciation for how dealer sales could be positively affected by T-4. It was during my phone interview with Dan Moore, president of RW Moore, the John Deere dealer for the southeastern part of North Carolina. Here's how he explained the up-side of this thing:
First of all, it's important to remember that iT-4 is a manufacturing regulation only - lots of states don't have end-user requirements yet, so nothing's forcing them to buy new T-4. Put that together with the fact that lots of contractors are having trouble getting their brains around the regulation, and they would sure rather stick to machines that run comparably to what they know for as long as they can rather than deal with something unfamiliar - and they're not thrilled, either, about having to depend on the dealer for servicing. (It's a shame they feel that way, though, isn't it.) What this adds up to, Dan explained to me, is that as replacement time eventually comes around on customer machinery, lots of folks are going to have a heightened interest in those late model/low-hour T-3 machines.
Will it translate into some positive sales results?
It'll be what dealers haven't had in a long time, Dan believes. "We've been in such a free-fall with values, that to have anybody buying at all was fantastic. It was a buyers' market. But when we transition to iT-4, in some regards it's going to go back to a seller's market. If you're sitting on an '08 T-3 machine that's got 900 hours on it because it was sitting in your rental fleet underutilized, you're going to get paid back for all that carrying cost. You should be able to command a premium for it."
Does any of this compute for you in your market? Why don't you tell me about it at Summit in Orlando - I'll be around, listening.
Happy New Year, good luck out there, and thanks for reading. Editor's Note
Kim Phelan (firstname.lastname@example.org) is the executive editor of Construction Equipment Distribution and director of programs for AED.
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