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North American Class 8 orders in June approached replacement levels and reached the second-highest volume of the year on what may have been a one-off event and not the start of a consistent rebound, analysts said.
Preliminary net orders rose 23.2% to 16,000 compared with 12,979 a year earlier, ACT Research reported, citing truck makers’ initial data. The year-over-year increase was the first since January and only the third since October 2018. January saw this year's most orders at 17,700.
North American replacement Class 8 levels are accepted to be 20,000 units a month.
“We are still a long way from a normal market. It’s going to be a slow return to average or expected,” as the industry waits to see the ongoing course of COVID-19 and its impact on the greater economy, ACT Vice President Steve Tam said.
Year to date, orders dropped 24.7% to 65,814 compared with 87,466 a year earlier.
FTR pegged June’s preliminary net orders at 15,500.
“Looked at historically, it’s a pretty boring, average number. But after three horrible order months in a row, it’s more a signal than the quantity. It says, ‘OK we have busted out of this bottom, and it’s time to climb out,” said Don Ake, FTR’s vice president of commercial vehicles.
Orders in March were 7,632 then in April sank to 4,251 — the lowest since 1995. In May, they reached 6,687, according to ACT.
But the June number was skewed by a couple of big orders that are not expected to be repeated next month, Ake said.
ACT offered a similar perspective and possible explanations for the jump.
“We suspect that order books opened early, again. If that is the case, it’s more of a shift in timing as opposed to an absolute increase in demand,” Tam said.
Preliminary data show that June orders for medium and heavy duty vehicles jumped to a four-month high, rising above the combined April and May order tally.https://t.co/ciEdI3Gd44#truck #semitruck #trucking #transportation pic.twitter.com/SPxENAqYeA— ACT Research (@actresearch) July 7, 2020
Truck makers traditionally open the order books for the next model year in September to October. Transport Topics contacted the truck makers to learn if they had opened up order boards for next year’s models.
Market leader Freightliner, a unit of Daimler Trucks North America, hasn’t yet, a spokesman said.
Peterbilt Motors Co., a brand of Paccar Inc., “is currently selling model year 2021 trucks,” a spokesman said. Kenworth Truck Co., also a Paccar brand, also said it hasn’t yet, according to a spokesman.
Volvo Trucks North America, a Volvo Group brand, declined to comment. Mack Trucks, also a brand of Volvo Group, did not respond.
Navistar has not yet published model-year production timing or 2022 model pricing.
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“We continue to adjust line rates to demand, managing the backlog that still represents over 25 weeks of planned build slots [for Classes 6-8],” former Navistar President and CEO Troy Clarke said during an earnings conference call in June to discuss second-quarter results.
Persio Lisboa, formerly Navistar’s chief operating officer, succeeded Clarke as president and CEO on July 1. Clarke moved into the newly created role of executive chairman.
Tam suggested another possible explanation: “Because the truck makers did not build many trucks in April and May, sales from inventory likely increased. Under the restocking programs, dealers receive discounts on orders to replace units sold from inventory.” He noted there were likely other possible scenarios.
Meanwhile, one fleet has the potential to play a large role in raising orders.
Less-than-truckload carrier YRC Worldwide Inc. has $350 million to spend on replacement equipment for its aging fleet after receiving a $700 million federal loan, announced July 1, in exchange for a 29.6% share of the company. The loan fell under the Coronavirus Aid, Relief, and Economic Security Act.
Investment banking firm Cowen Inc. conducted its 2Q20 Truck Equipment Survey and found that of the fleets anticipating to order new Class 8 vehicles this year, 38% of small carriers (one to 50 trucks) intended to do so, up from 34% a year earlier, but down from 44% in the first quarter. On the other hand, 67% of large carriers (more than 250 trucks) planned on ordering, up from 64% a year earlier, but down from 70% in the first quarter.
“All indications now are that [spot] freight is growing, albeit from a very low level, but that seems to be encouraging to some fleets,” Tam said.
Ake said the rate environment in general has improved.
“Spot rates more than contract, but spot is what we measure the closest because it is real time,” he said.
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