Though freight volumes took a slight dip in November, orders for new Class 8 both up and down the GVW scale remained strong, according to ACT Research Co. (ACT). Net orders for heavy-duty Class 8 commercial trucks in North American reached 26,268 units in November, up 38% month-over-month from October, said ACT, while medium-duty Class 5-7 net orders posted a strong 28% month-over-month increase. The strong sales indicate fleets are finally picking up the pace to replace severely aging equipment.
The strong order surge came amid a slight drop in freight volumes. The American Trucking Assn. (ATA) for-hire truck tonnage index slipped 0.1% in November, after rising 0.9% in October and 1.9% in September.
Analysts suggest fleet owners needs to bring in significant numbers of new equipment as the average age of Class 8 trucks in U.S. fleets is now 6.5 years – the highest it’s been in 30 years.
“There’s also a srong ‘forward component’ to [new truck] orders right now,” Kenny Vieth, ACT president & senior analyst, told FleetOwner. “Fleets are not placing orders now and expecting trucks to be delivered several months down the road; they want those new units as soon as possible. That ‘immediacy’ of new truck demand has been a key trend in 2010.”
Vieth added that November Class 8 orders were actually stronger than ACT’s projections of 21,000 units for the month. However, he said that’s partially due to fleets trying to get ahead of price increases announced by truck makers for next year.
“The ramp-up in orders over the past three months suggests that the barriers to increasing heavy-duty demand are being surmounted, setting the stage for a healthy demand rebound in 2011,” Vieth said. He noted that despite a healthy increase in the build rate by OEMs, the backlog of Class 8 units to be built has increased by almost 10,000 units.
For 2010, ACT still projects full-year production of Class 8 vehicles to reach 152,000 units, which would be up 29% from 2009 yet still well below historical replacement demand. ACT forecasts that Class 8 demand will continue to climb over the next two years, with production in 2012 exceeding 300,000 units.
“While the hurdles have been significant, the facts are that tight capacity and improving shipment volumes are allowing carrier profits to rise,” Vieth added. “And the fleet is as old as ever, so a portion of those profits will go to replacing those aging trucks.”
ATA chief economist Bob Costello said he is not overly concerned with the small decrease in tonnage hat occurred in November. “Tonnage increased for two consecutive months in September and October and I don’t expect volumes to rise every month,” he said. “Additionally, the decrease in November is much smaller than the gains during the previous two months.”
Costello added that November tonnage climbed 3.9% vs. the same month the year before, and while that’s significantly lower than October’s 6% year-over-year increase, year-to-date tonnage [January thru November] is still up 5.9% compared with the same period in 2009. He also expects trucking tonnage to grow modestly during the first half of 2011 before accelerating by year’s end into 2012.