The pandemic and supply chain disruptions of the past two years have created some visible signs of logistical issues, such as empty shelves in stores and increased waiting times for many items. However, those challenges are also impacting a fundamental part of that chain, the eighteen-wheeler and trailer supply.
Growing Shortages of New & Used Class 8 Vehicles
Consumers and businesses alike have gained a new appreciation for the role of truckers in keeping our economy operating. The hard facts, such as $53 billion dollars a day of freight and more than 72 percent by weight of all goods being handled being moved annually by commercial trucks, now carry special meaning. Those numbers translate into factories not operating, food not being shipped, and thousands of items in short supply when those trucks aren’t rolling.
Currently, the shortages are affecting the availability of trucks and trailers needed to assist in the growing demand and time of recovery. Prices for used vehicles, and a lack of new ones, are creating a crisis for independents and trucking firms alike. The impact of the pressures of supply and demand allows truck suppliers to use a lack of materials such as rubber, steel, resins, semiconductors, and other components to justify steep double-digit increases in quoted prices.
However, even with those increased prices, the supply continues to lag the capacity needed by major carriers. Significant new orders were placed in 2021 at a level that exceeded supply. As of the first quarter of 2022, those orders exceed supply by a significant level. The industry reports more than 365,000 units were ordered last year, but even that level was less than needed to replace aging stock and meet new demand.
According to the vice-president of commercial vehicles at FTR, “Fleets need a considerable number of new trucks right now. Industry capacity is extremely tight, resulting in elevated freight rates. The carriers have freight to haul and funds available for new trucks, but OEMs can’t build enough. Also, the large fleets have had to run vehicles beyond their trade-in cycles and need replacement trucks.” He went on to note that the order rate understates the existing demand because of the lack of production capacity in the industry.
An Industry Balancing Act
The challenges to trucking firms are made even more concerning because of the past cycles in the industry. Concerns over weak freight rate increases and possible additional pandemic-related economic downturns are weighed against the critical lack of vehicles to provide adequate shipping capacity.
Pushing older vehicles past their expected life span increases maintenance costs and even poses some safety questions. Additionally, the same concerns over parts that are delaying production are a factor in properly servicing existing stock.
The firms needing replacement vehicles are shifting some of their orders and priorities to maintain their position in deliveries from OEMs and truck/trailer manufacturers. Those producers are also making decisions such as using limited availability of the critical semiconductor chips to produce larger gross weight vehicles to provide maximum capacity for fleets.
Many of the producers simply canceled a large portion of outstanding 2021 orders based on the lack of components and materials. The irony is that these shortages were due, in part, to truck capacity shortages.
One downside of this ordering rebalancing is carriers are finding that replacing canceled 2021 orders for 2022 units are calling for higher prices for the same vehicles. This new financial pressure is part of the ongoing effort to rebalance freight rates and driver compensation during this challenging year.
The big question for the industry is whether there will be further disruptions in the supply chain during 2022. With a current running total of 437,000 units for the previous 12 months (as of November), it will be well into mid-2023 before the current demand will be met even without any further issues arising.