Since no country has previously left the European Union, the outcome of any future negotiations between the U.K. and the European Union is uncertain and may affect the timing, terms of trade, and the level of new vehicle registrations in those markets.
Retail Commercial Truck Dealership. For the nine months ended September 30, 2017, North American sales of Class 5-8 heavy and medium duty trucks, the principal vehicles for our PTG business, were 363,265 units, a decrease of 1.7% from the same period in 2016. The Class 5-7 medium-duty truck market increased 4.2% to 185,780 units from 178,344 units in the same period in 2016. The largest North American market, Class 8 heavy-duty trucks, decreased 7.1% to 177,485 units from 191,100 units in the same period in 2016. According to ACT Research (“ACT”), retail sales of Class 8 heavy-duty trucks were generally expected to decline in 2017; however, the rate of decline is moderating based upon the latest available data from ACT. During the third quarter of 2017, Class 8 build rates and retail sales increased, with a 62.7% increase in net orders, when compared to the same period last year, as stabilization in the values of used trucks, improved freight metrics, and increased utilization, are generally indicating improved conditions in the marketplace. The service and parts business of our PTG commercial truck dealerships, which represents approximately 75% of our retail commercial truck dealership gross profit, is expected to remain strong, as end users retain existing equipment longer than previously anticipated.
Commercial Vehicle Distribution. Our PCV Australia distribution business and the on-highway portion of our PPS business each operate principally in the Australian and New Zealand heavy and medium duty truck markets. For the nine months ended September 30, 2017, the Australian heavy-duty truck market reported sales of 8,262 units, representing an increase of 18.9% from the same period in 2016. For the nine months ended September 30, 2017, the New Zealand market reported sales of 2,484 units, representing an increase of 21.7% from the same period in 2016. The brands we represent in Australia hold an 8.9% market share in the Australian heavy-duty truck market, and a 5.4% market share in New Zealand. The Australian heavy-duty commercial vehicle market has lagged behind historical sales levels in recent years partly due to difficult macroeconomic conditions and the relative weak price of commodities in these markets. However, recent improvements in the heavy-duty truck market and overall market conditions, as well as a moderate strengthening of the Australian Dollar, have led to increasing industry sales. We also expect continued new order growth from the off-highway engine distribution business as a result of improving market conditions.
Penske Truck Leasing. We expect PTL to benefit from continued strong demand for its full-service truck leasing, contract maintenance, and logistics services resulting from continued positive economic conditions in the United States and customers’ desire to increase efficiency and lower costs by outsourcing non-core responsibilities such as fleet ownership. As a global logistics services provider, we also expect PTL to experience increased demand for its logistics supply chain solutions based primarily on optimizing the use of drivers, trucks, warehouses, and other services within the supply chain. In 2016, freight demand did not match projected levels and a decade-high sales year for Class 8 trucks in 2015 led to excess capacity in the market and a reduction in utilization rates. As a result, fleets right-sized their capacity to meet freight demand in the marketplace and new and used truck sales were impacted, resulting in a decline in the North American Class 8 new and used heavy-duty truck market. However, in 2017, we have seen improved conditions within PTL’s commercial truck rental business, an increase in the utilization rate of its fleet, and stabilization of used truck prices, which indicate the supply and demand balance may be improving.
As described in “Forward-Looking Statements,” there are a number of factors that could cause actual results to differ materially from our expectations.
Automotive and commercial truck dealerships represent the majority of our results of operations. New and used vehicle revenues include sales to retail customers and to leasing companies providing consumer leasing. We generate finance and insurance revenues from sales of third-party extended service contracts, sales of third-party insurance policies, commissions relating to the sale of finance and lease contracts to third parties and the sales of certain other products. Service and parts revenues include fees paid by customers for repair, maintenance and collision services, and the sale of replacement parts and other aftermarket accessories, as well as warranty repairs that are reimbursed directly by various OEMs.