Preliminary orders for Class 8 trucks fell about 80 percent compared with August 2018’s record orders. All eyes are on the fall months to see how soft the market for new equipment will be.
Orders fell for the tenth consecutive month, one factor in a trucking sector recession as the SONAR chart shows.
“The huge orders in 2018 supported the robust production last year and through much of 2019,” said Don Ake, vice president of commercial vehicles at FTR Transportation Intelligence.”Now the economy has slowed and there are enough trucks to handle the available freight growth.”
Despite 2020 order books being open at most truck makers in August, most of the roughly 11,000 new trucks ordered were to replace older trucks.
FTR said 10,400 Class 8 orders were placed in August, down 80 percent year-over-year. ACT Research said 10,900 trucks were ordered, down 79 percent. FTR said orders were up 4 percent over July; ACT said month-over-month orders rose 6 percent. August 2018 orders were the highest in any month in industry history, ACT said.
Class 8 orders for the past 12 months have totaled 298,000 units, according to FTR.
Fleets are holding off placing 2020 orders as they absorb deliveries of trucks purchased in 2018. Unlike the capacity shortage late last year and earlier this year, build slots are available. Wait times are down as the order backlog has fallen 44 percent since peaking in October 2018.
Component shortages that plagued truck production and added costs because of expediting critical parts last year are no longer a factor, Persio Lisboa, chief operating officer at Navistar International Corp. said on a call with analysts on Wednesday, September 4.
“Order weakness is increasingly the story of an over-capacitized Class 8 fleet, as truckers start to make their plans for 2020,” said ACT President Kenny Vieth, adding the industry’s order backlog remains substantial.
Uncertainty over slowing domestic and global economy growth is keeping fleets on the sidelines, Ake said.
“There is a tremendous amount of uncertainty due to tariffs and the trade war with China,” he said. “We do expect orders to increase in October. However, if freight growth is still muted and manufacturing sluggish, the big fleets may just place orders for the first quarter of 2020 and take a wait-and-see approach.”
Cancellations of current orders are in the typical 3 percent to 4 percent range, Navistar executives said.
“There’s not a lot of orders in there that have the potential for cancellation,” Navistar CEO Troy Clarke said on the earnings call.
However, fleets are retiming orders because so many new trucks are arriving and it is taking longer to dispose of used trucks they are replacing.
“Especially on Class 8 sleepers, we as an industry are a little over-supplied,” Clarke said. “So, there will be pressure on those prices until that is resolved. I think that’ll take probably a couple of quarters.”
Navistar projects Class 8 retail deliveries in 2020 will likely be down 25 percent to 210,000 to 240,000 units compared with 295,000 to 315,000 this year.