June Class 8 Orders Continue Rebound
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ACT preliminary data showed orders increased 4.5% year-over-year to 16,200 units from 15,500. It was the second consecutive year-over-year increase with the only other positive month this year being February. Orders also increased 4.5% from the previous month at 15,500 units. ACT noted orders still were seasonally soft despite the gain.
“Given robust Class 8 orders into year-end 2022 and the ensuing backlog support, coupled with normal seasonal order patterns, orders were expected to moderate into Q2 and remain at relatively soft levels into mid-Q3,” said Eric Crawford, vice president and senior analyst at ACT. “June orders were in line with this view.”
Crawford added the relatively few build slots still free in the second half of the year suggests order intake is unlikely to find meaningful traction until order boards open for 2024. He also noted the latest numbers bring the year-to-date monthly seasonally adjusted average to 18,200.
Preliminary NA Class 8 net orders remained seasonally soft (as expected) in June with 16,200 units, up 5% y/y and 4% m/m, while preliminary Classes 5-7 rose a modest 2% y/y with 17,700 units (-12% m/m).
https://t.co/5qiSq0c3kU#truck #semitruck #Class8, #ACT, #ACTResearch pic.twitter.com/OYlyPTy5Yl — ACT Research (@actresearch) July 6, 2023
“The main reason we don’t see orders coming in higher is because the OEMs still have not yet opened the order books for 2024,” said Magnus Koeck, vice president of strategy, marketing and brand management at Volvo Trucks North America. “In addition to the OEMs not opening 2024 yet, the market still has question marks with lower freight rates, higher interest rates, etc. However, there are still many fleets who still need to get new trucks into their operations due to the backlogs over the last two years.”
Koeck anticipates a surge in orders once the order books open for next year, noting that the industry will have a clearer picture of how strong next year will be between August and October.
“We are still on allocation,” Kenworth Sales Co. President Kyle Treadway said. “We work on a quarter-by-quarter basis, and we filled up our third quarter. All of our slots are on allocation. We’re working on our fourth quarter, and we’re pretty close to getting that done. We’re almost there, but the pace of orders has slowed.”
Treadway added that during the pandemic he saw three buyers for every build slot, but now he is seeing one for every build slot. He has heard from customers about there being a slowdown in freight volumes but noted that has not been a consistent trend across the board.
“It differs by segment,” Treadway said. “So residential construction is slow, but commercial construction and public works remains busy. Oil and gas in our region remains busy. So, there’s winners and losers right now.”
FTR Inc., an economic and freight forecasting firm, found in its preliminary data for the month that Class 8 truck orders actually decreased 6.6% year-over-year to 13,800 units from 14,778. Its report noted the level of order activity continues to be below replacement demand. FTR also reported orders were flat month-over-month.
“FTR has been anticipating net Class 8 orders to drop over the last several months to below 10,000 units,” FTR Chairman Eric Starks said. “This has not occurred, which is a positive sign that fleets still need equipment. However, with all the order slots filled for 2023 and 2024 slots yet to be fully opened, it is unclear when these ordered trucks will be built.”
Starks added that manufacturers have hinted for months that they are willing to keep build activity elevated well into the fourth quarter. He noted that with the recent solid order totals, it is all but guaranteed that fourth-quarter production will be strong.
“The normally weaker orders due to a seasonal midyear slowdown coupled with strong build activity will keep shrinking backlogs,” Starks said. “This will pull backlogs back into a normal range over the next several months as the backlog-to-build ratio is currently elevated and putting pressure on OEMs to keep building equipment.”
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TD Cowen found in its second-quarter truck equipment survey July 12 that 58% of carriers plan to order new Class 8 trucks over the next 12 months. That compared with 51% last quarter. But 65% of carriers that do not plan to order trucks noted there was no need to as opposed to 56% in the first quarter. The survey asked participants about the size of their new orders, above normal replacement levels, as a percentage of their total fleet size.
“Among survey participants who aren’t planning on ordering new Class 8s (above normal replacement levels), 65% answered that they aren’t ordering simply because they have no need for new Class 8s, up from 56% last quarter,” TD Cowen analyst Matt Elkott wrote in the report. “Twelve percent answered that they have a need, but due to economic or geopolitical uncertainty, they are refraining.”
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