Preliminary orders for trailers in September suggest 2020 production will be solid though significantly lower than this year’s anticipated record build.
Fleets ordered about 18,500 to 19,000 trailers in September, based on estimates by ACT Research and FTR Transportation Intelligence. ACT expects final orders to be up about 75% over anemic August orders. FTR puts the gain at 81% month-over-month. September orders were the highest since February.
The major builders of trailers are Hyundai Translead, a unit of Hyundai Motor; Great Dane Trailers Inc.; and Wabash National Corp. (NYSE: WNC)
Tough comparison
But compared to the roaring pace of a year ago, net orders are down 54%, according to ACT. Record-setting orders in September 2018 orders were 68% ahead of this September. FTR shows year-over-year orders down 66% unadjusted for cancelations.
“Given that the all-time monthly order record was set last September, a dramatic year-over-year decline was a foregone conclusion,” said Frank Maly, ACT director of Commercial Vehicle Transportation Analysis and Research.
Final September orders should be plus-or-minus 3% of the preliminary figures, ACT said.
Cancellation rates were higher than normal in September but production volumes over the last nine months have been so high that the additional volume was barely missed, said Don Ake, FTR vice president of commercial vehicles.
“The increase in September orders signals the trailer market is becoming much more stable and should be settling into historic order patterns after a turbulent couple of years,” he said.
Great to good
Trailer production this year is expected to hit 326,000, up from 317,000 in 2018. Production is projected to fall to about 275,000 in 2020, Ake said. Trailer orders for the last 12 months were 264,000.
“Most people in the industry are pretty happy with a year of 275,000,” Ake told FreightWaves. “It’s going to feel like a dropoff but it’s still a decent year.”
Broken model
Predicting trailer orders has been difficult since the so-called Amazon effect began in 2014. Until 2015, tractor and trailer orders mirrored each other, Ake said.
Following a record 2018, tractor orders have slowed for 10 consecutive months, while production catches up. Retail sales of Class 8 trucks are projected to be in the mid-250,000 range next year. Full-year production in 2019 is expected to be about 325,000.
The growth in hub-and-spoke distribution and drop-and-hook trailer operations require more trailers, so trailer equipment orders continued to surge while truck orders and sales took a breather in 2016 before beginning to climb again in 2017. Business tax cuts in early 2018 left fleets with extra cash to invest in new equipment.
“The question in 2020 is whether dry vans and [refrigerated trucks] are going to cycle back down or whether the Amazon effect is going to continue,” Ake said.
“October is still the key month,” he said. “If you’re going to have a good trailer year next year, you’re going to have a good September. In a great or good year, bigger fleets will start ordering in September.”