Preliminary new orders of Class 8 trucks took a relative breather in June with about 26,000 bookings, 11% more than May and 61% better than the COVID-impacted number in June a year ago.
The issue holding back orders is that fleets know they cannot get delivery of the equipment until well into next year as manufacturers navigate supply constraints headlined by a critical shortfall of semiconductors critical to various operations.
The June order total is considered positive because it indicates the order cycle bottomed out at 24,000 orders in May, almost double the typical low point. FTR expects a surge of orders when manufacturers start booking orders for 2022 as soon as this month.
Transitory month
ACT Research counted orders of 25,700 units, up 11% from May, and a robust 61% higher than June 2020’s COVID-impacted intake. FTR pegged the number at 26,700, up 13% month over month and 71% year over year.
“Fleets are still in desperate need of new trucks to handle the surge in freight growth. The full opening of the economy continues to strain deliveries, with service levels falling at some of the most-reliable carriers.”
Don Ake, FTR Transportation Intelligence vice president of commercial vehicles
“It appears that June was a transitory month,” said Don Ake, vice president of commercial vehicles for FTR Transportation Intelligence. “Fleets grabbed the remaining built slots for 2021 and there are indications that some early orders for 2022 were added to the mix.
“Fleets are still in desperate need of new trucks to handle the surge in freight growth,” Ake said. “The full opening of the economy continues to strain deliveries, with service levels falling at some of the most-reliable carriers. Spot freight rates remain highly elevated, an indicator that freight capacity is being greatly stressed.”
First-quarter uncertainty
The first quarter of 2022 is uncertain from a production standpoint because unfilled orders from 2021 are expected to roll into 2022, he said. On a rolling 12-month basis, FTR put new Class 8 orders at 431,000 units, more than 20% beyond the industry’s production capacity.
“We believe the ongoing supply chain constraints could keep OEM build rates limited and push usual production out to 2022 as carriers attempt to secure capacity,” Morgan Stanley said in a research note to investors. “We hold our belief that the trucking cycle has more runway to go and we will not be seeing a large influx of supply into the market.”
Fleets trying to take advantage of a still robust freight market wish there was supply to be had. Not only are they flush with cash from elevated per-mile rates, additional capacity could help their balance sheets for when the market turns south, as it inevitably will.
The falloff in orders recognizes the reality of the manufacturers’ plight, said Kenny Vieth, ACT president and senior analyst. Seasonally adjusted annual rates are running higher for both heavy-duty and medium-duty trucks.
“We reiterate that order moderation aligns with expectations, driven by the supply of open build slots in 2021 and not fully opened 2022 order books, rather than any material falloff in demand for equipment,” Vieth said.
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