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April 20, 2020 3:15 PM, EDT

Commercial Vehicle Production to Fall 20% Globally in 2020, IHS Forecasts

Commercial vehicle productionA Mack truck cab on the assembly line. (Luke Sharrett/Bloomberg News)

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Global commercial vehicle production will plunge 20% this year compared with 2019, with the North American market slumping more than 30%, according to an analysis from IHS Markit.

The research firm said plant closures, sagging freight demand and other economic fallout from the COVID-19 pandemic are responsible for the steep decline. It forecast a 3% decline in global GDP this year.

IHS expects a production drop amounting to 198,000 Classes 4-8 trucks from its previous North American forecasts “as the economic slump combines with rapidly ebbing replacement pressure to undermine new orders.”

It believes the region at most will assemble 387,000 units, excluding bus chassis, this year.

Shuttered truck factories already account for approximately 13,000 units of lost production in North America this month alone, IHS reported.

Andrej Divis

Divis

Class 8 trucks will take the biggest hit, with production dropping 40% compared with 2019. The work truck portion of that segment will hold on better than Class 8 tractors. Refuse collection, for example, will continue, and companies may have to replace trucks. Utilities also may need to replace equipment.

“There will be certain pockets that continue to buy equipment,” said Andrej Divis, director of commercial vehicle data and forecasts at IHS Markit.

Production of Class 8 tractors will fall 50% from 2019 levels. The steep decline is mostly a result of U.S. truck customers holding back or canceling orders. IHS said Canada and Mexico also will see significant declines in 2020 demand. IHS based much of its U.S. analysis on a review of weekly new vehicle registration statistics, as that is available sooner than full-month production figures.

“The heavier side has taken more of a hit,” Divis said.

IHS forecast that Classes 6-7 production will decline by 35%.

Classes 4-5 will drop by about 20%.

“They are not being hurt as badly,” Divis said.

It was helped by demand for smaller trucks to help fulfill e-commerce logistics as most retail establishments besides grocery and household goods stores in the U.S. are closed and consumers turn to online shopping, he said. But all of the numbers could change depending on how the economic effect of the pandemic plays out, Divis added.

S&P Global Economics forecasts that the U.S. economy will contract 5.3% this year, including a historic annualized decline of almost 35% in the current quarter. Trucking, however, will be one of the first industries to recover from the coronavirus recession, according to Divis. IHS expects the health crisis will be under control by the fourth quarter and something close to normal economic activity will resume.

“If that happens, we will see a rapid increase in demand from shippers as businesses start to restock,” Divis said.

That will result in new truck sales as fleets start to size for the jobs they expect to come along, he said.

The IHS assessment mirrors what much of the trucking industry is seeing.

XPO Logistics CEO Brad Jacobs

Jacobs

In a letter to shareholders earlier this week, XPO Logistics CEO Bradley Jacobs said, “We expect that 2020 will be a lost year for earnings growth in our industry and most industries around the world.”

XPO Logistics ranks No. 3 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 1 on the Transport Topics Top 50 list of the largest logistics companies in North America.

“The last half of March declined sharply as large sectors of the economy came to a near halt,” Jacobs said. “Our industry is a leading indicator, so we felt the pain early, and we’ll be at the forefront of the rebound when the world returns to work.”

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