Class 8 truck orders rebounded barely in May. However the necessary number is the industry’s backlog and the way much of it’s being manufactured.
“Fleet demand for equipment doesn’t look like waning as they still need to take delivery of latest equipment,” said Eric Starks, chairman of FTR Transportation Intelligence. “Strong backlogs are keeping construct demand strong, and FTR doesn’t anticipate any negative impact on construct activity resulting from the recent order activity.”
So even a comparatively small variety of orders — 13,600, in response to FTR — in May doesn’t mean much to the healthy pace of producing. Construct slots for 2023 are practically full. Order books for 2024 won’t open until August on the earliest.
Burning off the Class 8 backlog
OEMs are burning off the backlog of orders they accepted through the fourth quarter of 2022. Those were the waning days of the pandemic and constriction from supply champion shortages. The backlog fell from 240,000 in December to about 190,000 at the tip of May, Kenny Vieth, ACT Research president and senior researcher, told FreightWaves.
“It’s still a historically high backlog, but not a historic high,” he said. “Relatively speaking, a 200,000-unit backlog remains to be a Top 10%-type number.” An order placed today can be delivered in seven months in comparison with a typical five-month wait, Vieth said.
Backlogs exceeded 300,000 units in 2018 and 280,000 units in 2021.
Are production estimates too low despite the slowing economy?
ACT projects industry production of 318,000 Class 8 trucks this yr. Its estimate might be low depending on how much of an anticipated 12,000-unit pull-ahead occurs this yr due to tougher emissions rules going into effect in California in January. Class 8 truck prices are expected to rise not less than $25,000 due to required emissions-reducing equipment.
Pull ahead purchases aside, fleets forced to maintain trucks in service beyond their desired trade-in window clamor for brand new products. That’s happening whilst per mile spot and contract rates have fallen.
“Because the age starts creeping up, the operating costs creep up they usually’re outside the operating sweet spot that they prefer to be in,” Daimler Truck North America CEO John O’Leary told reporters before the Advanced Clean Transportation Expo in May. “So, most of them are all too anxious to get much more vehicles than they’ve got the last couple of years.”
As money for road and bridge projects flows to states from the Infrastructure bill signed into law in November 2021, a few of it goes for brand new equipment.
“When the phone rings, it’s normally someone saying, ‘Hey, I would like a thousand or 2,000 or 5,000 more trucks,” O’Leary said. “We see that not only on the highway long-haul stuff, but on the heavy vocational side resulting from the passage of the IRA and a few of these infrastructure bills. The entire thing with projects, construction projects and things like that’s beginning to take off too.”
Business still good despite slowing Class 8 orders
ACT pegged preliminary Class 8 orders in May at 15,500. That’s up 29% over April and 10% in comparison with May 2022. The evaluation group sees “relatively soft” orders through the center of the third quarter. That’s because manufacturers are producing trucks on back order.
Sub-10,000-unit order months are still possible over the summer, FTR’s Starks said. Order activity continues to be below substitute demand levels, but much of the substitute for older trucks is already booked. Total Class 8 orders on a rolling 12-month basis equal 298,700 units, the economic forecasting firm said.
“It’s not pretty much as good because it was, nevertheless it’s still pretty rattling good,” ACT’s Vieth said.
Related articles:
April Class 8 orders tank but OEMs have ample backlogs
March Class 8 truck orders reset to normalized demand
Why Class 8 truck orders are outperforming a shaky economy
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