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April 7, 2020 5:00 PM, EDT

March Class 8 Orders Drop to Recessionary Levels

Class 8 ordersWorkers install parts on a truck engine at a Mack Trucks assembly facility in Macungie, Pa. The last time Class 8 orders fell below 10,000 was during the Great Recession. (Luke Sharrett/Bloomberg News)

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Orders for North American Class 8 vehicles in March fell below 8,000, ACT Research reported, as already weak freight demand collided with the spreading coronavirus.

Months of similarly weak truck orders are coming, leading to production levels plunging off a cliff compared with a year earlier, ACT forecast.

Preliminary heavy-duty truck orders plunged 50% to 7,800 units in March from 15,783 in the same month a year ago, according to ACT, reporting truck makers’ initial data. It will update the final total later in the month when cancellations become available.

Steve Tam of ACT Research

Tam

“On the Class 8 side, we were already slowing down because of the slowing manufacturing and freight pieces,” ACT Vice President Steve Tam said. “This is now the first blush of COVID-19-infected numbers.”

Class 8 orders previously were below 10,000 for eight consecutive months during the Great Recession from December 2008 to July 2009, Tam said.

Economists and other observers have said the overall economy is in a recession, with some predicting it could last three consecutive quarters.

ACT’s forecast as of April 7 is that Class 8 North American production will plunge to 134,000 vehicles this year compared with 344,600 a year ago.

Recently, truck makers announced temporary shutdowns for April, which one fleet executive said would disrupt delivery schedules for orders that were already placed.

Brian Matthews, American Central Transport's vice president, operations

Matthews

“We put in orders late summer for this year; about 120 trucks is what we put on order,” said Brian Matthews, vice president of operations at American Central Transport Inc.

The Kansas City, Mo.-based truckload carrier operates about 325 heavy-duty trucks.

“The problem is the truck factories are down. Some of those orders are just going to be delayed. We had 2020 spread out, with about 10 a month,” he said.

“So what we’ll do is, instead of using those trucks that are approaching higher mileage that we would trade, we have some newer buffer trucks. We’ll move drivers to an available truck, and keep that going as long as we can until new trucks show up,” Matthews said.

Asked how business was going, Matthews said the carrier enjoys a pretty diverse customer base.

“Some areas are up, and some are not shipping at all,” he said. “We have had to go out to the spot market considerably to get some loads since the contract customers aren’t there. If you are in the right commodities, I think things are doing pretty good. Retail, automotive are not doing very good. I think the refrigerated trailer business is doing pretty good, the food stuff. We just do dry vans. We are not seeing a need to lay off anybody, we are hanging in there.” He added the company has not canceled any truck orders for delivery this year, and he does not expect it will.

Don Ake

Ake

FTR pegged preliminary Class 8 orders at 7,400.

“Things did not stop. They slowed down significantly in March,” said Don Ake, vice president of commercial vehicles at FTR. “It has gone to recession levels.”

He expects cancellations are going to be high. But big fleets, going forward, were not likely to deviate much from their typical trade-in cycles, Ake noted. Yet, 91.3% of fleets are six or fewer trucks; 97.4% operate fewer than 20, according to American Trucking Associations.

Ake believes these small fleets will sit out 2020 to conserve cash. Many of them that will need additional trucks will explore the used truck market — again, to conserve cash.

“The March orders were to expectations, except the expectations were so low,” Ake added.

For ACT, the current situation means orders will remain in a trough for six months, and then begin to increase on a sequential basis in the fourth quarter.

Of late, every time ACT goes back to the drawing board, Tam said, “the picture becomes a little more bleak compared with the previous numbers. We are not making quick enough progress against the coronavirus, and so that’s likely to extend the downturn in our industry and push the bottom further into the future.”

Meanwhile, if maintenance costs mount on American Central Transport’s vehicles and new truck deliveries are delayed, then it may have to consider leasing.

“We have never been in a situation where we needed to rent,” Matthews said. “But in this case, things are different and have never happened before.”

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