As the months tick on, the backlog for new Class 8 truck orders continues to grow, with staffing issues resulting from COVID-19 playing a part in the decreased output of components needed for production. It goes without saying that the limitation on new trucks hitting the roads is resulting in the operation of older equipment to fulfill already tight capacity restraints.
According to ACT Research, the number of Class 8 trucks sold in February was down 8.4% from the month prior, with only 15,727 new trucks being released. This number is nearly half of the monthly average last January through August 2020 of 31,000, according to ACT’s Kenny Vieth.
Could it be that truck orders are down? The answer is no. Actually, quite the contrary. Orders in February were up 212% YOY, reaching a backlog on March 1st of 228,000, which leads to a startling “11.2 months just to clear the backlog if no other orders were placed.” (1)
So why the increased backlog? One reason ACT provides is a staff shortage due to COVID-19 between people not returning to work yet and those out sick. A reduction in staff is leading to a decreased turnout of manufacturing parts including tires, seats, steel, etc. and these manufacturers, in turn, need materials from their suppliers who are also struggling to keep up with demand. (1)
The same issues are being reported for trailer manufacturers, which had an order rate in January of over 66% more than what was being produced, according to ACT’s Trailer Components Report.
What happens when a company can’t purchase new trucks? They are forced to keep older ones on the road or face further capacity issues. This greater need translates to higher sticker prices for updated equipment.
As a trickledown effect, the shortage of trucks, as well as drivers, will continue to keep freight rates strong.
As the American Trucking Associations’ Bob Costello explained last week, “he expects US GDP to grow by almost 5% in the first and fourth quarters, and by around 7% in the second and third quarters driven by the increased rate of vaccinations and the $1.9tr stimulus package,” but driver shortage remains a real concern. (2)
Costello pointed out that driver pool candidates are limited, with only 6% of truck drivers being female and the Drug and Alcohol Clearing House removing nearly 48,000 drivers from the road with only 25% following through with the return-to-duty process.
Not only is capacity a factor when looking at freight rates, but rising diesel costs, increased driver wages, and higher insurance rates, which Costello has seen liability insurance premiums rise 50% from last year, as well. (2)
Overall, demand is not looking to let up anytime soon and the backlog for new Class 8 trucks is expected to worsen. Shippers can expect to see capacity issues and higher rates as a result.