Despite a dip in Class 8 truck orders for May, demand for commercial trucks and trailers continues to head in the right direction, according to analysts. Equipment order volumes are increasing in some cases ahead of expectations—even raising one forecast of third-quarter Class 8 sales.
“Truck orders are increasing almost a quarter earlier than we expected,” Eric Starks, president of research firm FTR Associates, told FleetOwner. “Also, the orders we’re seeing are all for ‘near term’ build slots, meaning carriers need the equipment now to meet demand. That’s a really good sign.”
Despite a 9.8% drop in Class 8 truck net orders from all major North American OEMs from April to May, Starks remains confident that order volumes will continue to build through the year, albeit in fits and starts.
FTR’s preliminary data shows Class 8 truck net orders in May totaled 12,903 units, resulting in an annualized order rate of 154,836 units – virtually equaling the previous three-month annualized rate of 154,120 units, the firm said. Its figures include the U.S., Canada, Mexico and exports.
Starks’ outlook dovetails with that of Steve Tam, vp-commercial vehicle sector at ACT Research Co. Tam also believes Class 8 orders will keep strengthening, despite month-to-month choppiness, for the rest of 2010.
“We’re actually adjusting our 2011 Class 8 order forecast down a little bit because near-term orders continue to build,” he told FleetOwner. “For example, by tradition the third quarter of the year is the slowest month for Class 8 orders – typically off 10% to 15% compared to the rest of the year. But this year, our expectation is that orders will increase [in the third quarter] in contradiction to past trends.”
On the trailer side of the ledger, net orders moderated in April from relatively stronger levels in the past few months, dropping 13% from March, according to ACT’s data. However, April net orders were 3% above the prior year’s level-- and year-to-date growth in net orders through April is 72%.
“While April was a little weaker than February and March, the trailer industry is in the early stages of a rebound from a very weak 2009,” said Kenny Vieth, a senior analyst and partner with ACT. “A potential indicator of continued improvement is the very low level of order cancellations over the past three months.”
He added that overall net orders continue to supersede build rates, which have boosted the order backlog to the highest level in 20 months. Net orders of dry vans and reefer vans, the largest volume categories, each softened slightly in April compared to March, while flatbeds and other specialty segments continued to gain strength.
Yet ACT’s Tam noted a new trend is starting to take shape: refurbishing trailers to extend their useful life, as opposed to buying new units.
“Over the past decade, OEMs have built more ‘bullet proof’ trailers, ones capable of longer than expected life cycles,” he explained. “The mismatch is that the trailer’s ‘box’ lasts longer than the chassis. Now some fleets, such as Wal Mart, are looking at whether it would be more cost-effective to refurbish older trailers vs. buying new units. With their scale, that could be the cheaper option.”
Tam said this refurbishment strategy has been a success for Class 8 trucks, with OEMs and independent firms over the years refurbishing used Class 8 sleeper tractors and turning them into daycab models. “This strategy is now coming to the trailer market,” he noted.