We have discussed previously here the impact of Covid-19 on truck production and prices. Factory shutdowns and an extended shortage of critical components were factors limiting supplies and driving used truck prices to unprecedented levels. Fortunately, the trends for production are now positive. Industry analysts are expecting 2023 to be a turnaround year that stabilizes production, supplies, and prices.
Positive Signs for the Industry
The two leading companies that focus on commercial trucking and Class 8 production data are ACT Research and FTR Transportation Intelligence. These research groups produce reports that are closely watched by industry insiders to predict the overall industry outlook for the availability of trucks and trailers.
According to a recent Fleet Owner article, both of the firms are reporting that new orders fell for each of the months during Q4 2022. However, that decline was balanced by an overall level of orders for the year that reflects a healthier picture for the manufacturers.
The article quoted ACT’s VP and senior analyst, Eric Crawford, “…September orders represented the highest monthly total on record, we’re inclined to view December’s order intake as a solid end to a robust final four months of the year.”
The CEO and chief intelligence officer of FTR, Jonathan Stark, provided support for this view when he observed, “Backlogs are still elevated but not at such a level that they can sustain significant deterioration without impacting production output. Despite these concerns, essentially all the production slots for the first half of the year are full and the second half of the year is starting to fill up as well.”
Still Impacted by Covid
Both groups and other industry analysts have closely watched the overall commercial truck inventory and production numbers for the past three years. This is due to wide fluctuations in orders and cancellations due to the pandemic uncertainties. In fact, the December drop was due in part to a large number of cancellations from one OEM group.
Trucking firms have struggled to match the availability of trucks with orders and industry trends. The widespread expectation of a recession (which some are already affecting demand) has compounded this balancing act.
Another ACT official notes, “the longer inflation remains elevated, the more aggressively the Fed will respond with higher interest rates. This … results in fewer commercial vehicles … and will likely exacerbate downward pressure on spot and contract rates, adversely impacting carrier profitability.”
Additionally, new laws and regulations combined with technology upgrades are making the process of keeping fleets efficient and at proper levels even more challenging.
View from the Trucking Firms
The ultimate determinant of the market demand and production is, of course, the frontline trucking firm. Nick Clinkenbeard, product manager at Wabash, notes, “It’s definitely a very dynamic market that we’re living in right now. … if you had a good way to predict where it’s going in the future, that’s a crystal ball that I think a lot of people would pay a lot of money for.”
The only thing worse than having too many trucks and trailers on the lot is not having enough to meet customer demand. These firms have been faced with a multitude of tough decisions since the spring of 2020 when it became increasingly difficult to obtain needed trucks, tires, and trailers.
That shortage meant increased maintenance, less efficient trucks on the road, and exorbitant prices for those that were available.
Virtually all sources reporting on the situation agree that the real wild card for the coming year is the degree and length of any recession impacting the demand for freight.
Taking all these elements into consideration, the industry is now forecasting that 2023 will see 174,000 Class 8 vehicles delivered in 2023. While this is a drop of more than 12 percent in the “catchup” number of 198,800 in 2022, it is more than the 168,600 in 2021 when the industry was fighting a rising backlog.
Leave a Reply