The U.S. trailer market is facing massive reductions in orders and production as the COVID-19 pandemic has led fleets to slam on the brakes for orders as they wait for a clearer economic picture for the rest of 2020 and beyond.
Preliminary net trailer orders for April sunk to the lowest level in the modern era (since 1990), coming in at just 300 units, according to FTR Transportation Intelligence. April order activity was down 95% compared to February and down 98% year-over-year. Trailer orders for the past 12 months now total 162,000 units.
Many fleets pulled back on orders previously scheduled for 2020 delivery and placed very few new orders in April as recessionary conditions increased. The dry van segment was hit particularly hard and refrigerated van orders suffered some as well, according to FTR. Vocational orders remained tepid after falling significantly in March. Some specialty segments are holding up better under the stress.
“Fleets remain in a severe wait-and-see posture until they can evaluate the damage done to the freight markets from the pandemic,” said Don Ake, FTR vice president of commercial vehicles. “Since the recovery from the economic crisis is highly dependent on the status of the health crisis, there is a huge amount of uncertainty in the trailer market.”
Numerous OEM plants were shut down for part of April; some for health reasons, some for lack of orders, and some for a combination of the two. According to this quarter’s issue of ACT Research’s Trailer Components Report, the U.S. trailer industry has shifted from the production/capacity challenges of the last three years — with corresponding pressures on the component and material supply chains — to a massive retrenchment in production levels.
“While there was no indication of any widespread COVID-19 lockdown driven shutdowns at trailer OEMs in the past quarter, the dramatic cessation of fleet investment has caused OEMs to quickly reassess their production volumes and staffing needs,” said Frank Maly, director of CV transportation analysis and research at ACT Research. “The short-to-medium term outlook will be entirely dependent upon the return of business to some level of normality and stability, which will drive freight demand for both manufacturing and consumer spending.”
Trailer purchases will likely remain on hold until fleets have a clearer view of how the freight economy will respond this year, according to FTR’s Ake. “The key element to the trailer market recovery is for fleet confidence to improve. Carriers saw freight softening at the beginning of the year and then it cratered due to the recession caused by COVID-19.”
He said there too many uncertainties for fleets to make large trailers purchases. “They will take the minimum number of trailers needed in the short-run and then increase quantities dependent on the speed and size of the recovery,” Ake said. “Orders should improve soon, but are expected to remain modest for the next few months.”
ACT’s Maly suggested that more freight demand would eventually challenge fleet capacity and drive increases in freight rates, which could help build more fleet confidence leading to more equipment needs. “However, the path to get to that point likely will be arduous,” he added.
ACT’s quarterly report, issued on May 15, cautioned readers to “expect trailer OEMs, where possible, to pull orders forward in an attempt to maintain production levels until the inevitable reductions in line rates and staffing occur,” which will also challenge materials and component suppliers, as bills-of-material will likely shift in both timing and specifications.
