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May 8, 2018 1:15 PM, EDT
April Class 8 Orders Miss Historic Mark
But Market for New Equipment Remains Hot, ACT Research Reports
Volvo truck bodies Volvo truck bodies at the company's plant in Virginia. (Volvo Trucks North America)

Class 8 orders in April cleared 34,000, while the swollen backlog from months of strong demand kept them from going even higher, according to ACT Research Co., and others pointed to a parts supply chain under strain.

Orders reached 34,800, up 45% compared with 24,007 a year earlier, according to ACT, which cited a preliminary figure it would revise when final data was available.

April’s total broke a trend begun in the first quarter, in which each monthly volume had been above 40,000 — a pace that has never continued for more than three consecutive months, according to ACT, based on its 30 years of collecting industry statistics.

“The ability to deliver trucks this year is waning,” ACT Vice President Steve Tam told Transport Topics.

Tam

“A constraint both buyers and manufacturers face is the strong demand itself,” he said, although orders still were stronger than he had expected.

“If you want to order a truck today, you order it then fill in the blank, and at most of the truck makers, hopefully, it is late this year. With some models, it’s certainly next year,” Tam said. “I think that contributed to the slowdown. Folks aren’t ready to commit to that long-term of a prospect,” for taking delivery of a truck.

Instead, some buyers are turning to the used-truck market for late-model, low-mileage vehicles or else buying a new truck off a dealer’s lot, even if it is not what they would have spec’d in an order, he said.

Research firm FTR pegged the preliminary orders at 34,700.

“It looks like it could be a record year for production that is not a pre-buy year [for instance, ahead of new emissions regulations as happened in 2006], said Don Ake, FTR’s vice president of commercial vehicles.

“But we may not get to that point because of supplier issues,” he said.

A top executive at a key supplier agreed there were pinch points.

“I would say, as we typically see in strong upturns like this, we’re seeing [pinch points] in base forgings and castings,” Meritor Inc. CEO Jay Craig said in an earnings conference call with analysts in May.

“We actually are right now backfilling for some of our competitors. So, we’ve once again been asked to step in and been able to successfully do that. I think the entire industry is operating very close to capacity, which we are as well,” he said.

Ake said his contacts in the forging industry are saying they have never seen demand this high.

Ake

“They can’t keep up with demand. It is tremendous. That’s because, across the economy, everyone else [in addition to trucking] is ordering from these suppliers,” Ake said.

His sources told him they think it could get worse, he said.

Meanwhile, one fleet has placed orders for trucks powered by compressed natural gas because they fit its operations better than ones running on diesel.

AJR Trucking — a mail carrier based in Rancho Dominguez, Calif. — received the first new Cummins-Westport near-zero engine to come off the production line. The engine went into a T680 day cab from Kenworth Truck Co., a unit of Paccar Inc.

AJR ordered 20 T680s with the engines, with 40 more similar trucks, although possibly with sleepers, scheduled over the next year as it shifts to CNG and away from diesel engines, AJR Vice President Jack Khudikyan told Transport Topics.

“We don’t see ourselves buying new diesel trucks if CNG works because, between the [state] grants we have and the available CNG fueling locations, it’s more feasible in the long run to go with natural gas — especially in the port operation where you have be near-zero emissions by 2023,” Khudikyan said.

AJR

Khudikyan with the Kenworth truck containing the first Cummins-Westport near-zero engine by Roger Gilroy/Transport Topics.

A sister company, MDB Transportation, does drayage work at the ports of Los Angeles and Long Beach, Calif.

AJR operates 250 trucks, he said. MDB has 30 trucks.

The near-zero ISX12N engine meets the California Air Resources Board low nitrogen oxide standard of 0.02 gram per brake horsepower-hour — a 90% reduction from engines operating at current U.S. Environmental Protection Agency NOx limit of 0.2 gram standard.

If the grants, which were $100,000 per truck, cease, then he just gets the return over a longer period, with the return on investment increasing to five years — “which is still feasible” — compared with 18 to 24 months with a grant, Khudikyan said.

“It also has to do with the price of diesel. As diesel goes up, the quicker you get your return,” he added. The average retail price for diesel in California on May 7 was $3.863 a gallon, or 93.6 cents higher than a year earlier.