In tracking and forecasting the overall trends in commercial trucking, a variety of factors are constantly evaluated. This includes everything from shipping rates to overall container traffic. Keeping a tab on the orders for new Class 8 vehicles is often seen as a solid leading indicator of the thinking of larger trucking firms.
Sorting out the Impacts
Accordingly, the industry took note of a recent report by the leading trucking industry analyst ACT. The monthly update from ACT indicates a drop in orders for the 18-wheelers. According to Kenny Veith, ACT president, “The Tractor Dashboard result affirms the steady and steep erosion in prospective business conditions for Class 8 tractors that have been the rule through the calendar year 2022. It is the first time the index has strayed into negative territory for two consecutive months since the COVID recession in April and May of 2020.”
Citing a variety of factors in their analysis, Veith went on to predict ongoing challenges in the Class 8 market through the remainder of the year. He notes specifically the decline in orders-to-build as something of a surprise.
Seeking a deeper explanation for this decline, other industry analysts looked to the latest report by FTR. This analysis shows June activity to provide another indicator that the market is reflecting many of the items mentioned in the ACT summary. That activity shows a preliminary report of just 15,500 new orders in June, compared with 25,824 units a year earlier.
It is traditional that trucking firms moderate their orders in anticipation of a summer slump. However, all the trucking manufacturers and trucking firms are now trying to add to their mix of items non-traditional factors such as:
- Ongoing concerns over the supply of chips and other components needed for the production of new rigs and trailers.
- Evaluating the near- and long-term impact of the current inflationary pressures. These impact not only fuel costs but the demands for capacity and shipments in the coming months.
- The aging fleets caused by early delays in shipping of new Class 8 trucks are reaching the limit of tradeoffs between costs, uptime, and safety.
- Trucking firms are focused on conserving capital considering the ongoing uncertainties around the economy and overall shipping demand and rates.
- The open-ended status of the war in Ukraine and its impact on global shipping and fuel supplies
- Ongoing fears over coronavirus mutations and possible lockdowns and further interruption of the supply chain.
Even with these uncertainties, the analysts note that moderate to strong growth was reported in June in all six of the largest manufacturing segments, indicating more robust demand for shipping volume through the remainder of the year.
Dealing with the Backlog
All these questions leave manufacturers dealing with the question of ramping up production and balancing that with potential market slowdowns. The current backlog of 7.6 months is itself affecting order levels as trucking firms cancel some orders to juggle their delivery dates to match unknown demand.
This combination of factors led Eric Crawford, also of ACT to tweet, “Considering Class 8 backlogs stretching into 2023, there is still no clear visibility on the easing of all things shortage, and the increasing market jitters about an impending recession, June’s net orders were quite solid.”
Thus, the overall summary of analysts seems to put a positive spin on the low orders as more a matter of uncertainty and the current backlog than a real industry concern. At the same time, everyone agrees there is significant pent-up demand for new Class 8s. Many trucks are currently produced to custom orders but not delivered due to the shortage of certain critical items.
Martin Daum, of Daimler Truck, notes, “We have an extraordinarily high, not to say record-breaking, order backlog. Our stock of unfinished trucks is also high. These are vehicles built to customer order for which important parts are still missing.”
These shortages continue to push up the prices of used rigs to record highs, and those vehicles also show increased maintenance costs and shortages of critical repair components.
All of this leaves the industry with a lot of questions that call for a much greater month-to-month focus on industry trends.