Class 8 truck orders rebounded slightly in May. But the important number is the industry’s backlog and how much of it is being manufactured.
“Fleet demand for equipment does not appear to be waning as they still want to take delivery of new equipment,” said Eric Starks, chairman of FTR Transportation Intelligence. “Strong backlogs are keeping build demand strong, and FTR doesn’t anticipate any negative impact on build activity due to the recent order activity.”
So even a relatively small number of orders — 13,600, according to FTR — in May doesn’t mean much to the healthy pace of manufacturing. Build slots for 2023 are practically full. Order books for 2024 won’t open until August at the earliest.
Burning off the Class 8 backlog
OEMs are burning off the backlog of orders they accepted during the fourth quarter of 2022. Those were the waning days of the pandemic and constriction from supply champion shortages. The backlog fell from 240,000 in December to about 190,000 at the end of May, Kenny Vieth, ACT Research president and senior researcher, told FreightWaves.
“It’s still a historically high backlog, but not a historic high,” he said. “Relatively speaking, a 200,000-unit backlog is still a Top 10%-type number.” An order placed today would be delivered in seven months compared to a typical five-month wait, Vieth said.
Backlogs exceeded 300,000 units in 2018 and 280,000 units in 2021.
Are production estimates too low despite the slowing economy?
ACT projects industry production of 318,000 Class 8 trucks this year. Its estimate could be low depending on how much of an anticipated 12,000-unit pull-ahead occurs this year because of tougher emissions rules going into effect in California in January. Class 8 truck prices are expected to rise at least $25,000 because of required emissions-reducing equipment.
Pull ahead purchases aside, fleets forced to keep trucks in service beyond their desired trade-in window clamor for new products. That’s happening even as per mile spot and contract rates have fallen.
“As the age starts creeping up, the operating costs creep up and they’re outside the operating sweet spot that they like to be in,” Daimler Truck North America CEO John O’Leary told reporters before the Advanced Clean Transportation Expo in May. “So, most of them are all too anxious to get even more vehicles than they’ve got the last couple of years.”
As money for road and bridge projects flows to states from the Infrastructure bill signed into law in November 2021, some of it is going for new equipment.
“When the phone rings, it’s usually someone saying, ‘Hey, I need a thousand or 2,000 or 5,000 more trucks,” O’Leary said. “We see that not just on the highway long-haul stuff, but on the heavy vocational side due to the passage of the IRA and some of these infrastructure bills. The whole thing with projects, construction projects and things like that is starting to take off too.”
Business still good despite slowing Class 8 orders
ACT pegged preliminary Class 8 orders in May at 15,500. That is up 29% over April and 10% compared to May 2022. The analysis group sees “relatively soft” orders through the middle of the third quarter. That’s because manufacturers are producing trucks on back order.
Sub-10,000-unit order months are still possible over the summer, FTR’s Starks said. Order activity continues to be below replacement demand levels, but much of the replacement for older trucks is already booked. Total Class 8 orders on a rolling 12-month basis equal 298,700 units, the economic forecasting firm said.
“It’s not as good as it was, but it’s still pretty damn good,” ACT’s Vieth said.
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