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December Class 8 orders down, but annual total is solid

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Preliminary data for the orders of Class 8 trucks in North America in December revealed a substantial decline from November, but the numbers for the year were quite strong, say two firms — ACT Research and FTR — that record and analyze order and sales information for new trucks, used trucks and trailers.

ACT Research said preliminary North America Class 8 net order data show the industry booked 21,300 units in December, down 24 percent sequentially from November and 43 percent from year-ago December.

“For all of 2018, Class 8 orders totaled 490,100 units, far outstripping the previous annual order tally set in 2004 at 390,000 units, with orders averaging 40,800 units/month last year,” said Kenny Vieth, ACT’s president and senior analyst. “Owing to its status as the strongest order month of the year, seasonal adjustment is always unkind to Class 8 orders in December, dropping the month’s volume to a 25-month low of 17,300 units. It is important to put slowing orders into context. With a 300,000-plus unit backlog and a solidly booked build schedule, the drop in orders is in-line with expectations.”

FTR reported preliminary North American Class 8 orders for December fell to 21,000 units, the lowest total since August 2017.

December order activity was as expected, with fleets ordering to secure a dwindling number of available build slots in the second half of 2019, FTR said, adding there are few build slots remaining for 2019, so the industry should expect orders totals to remain low the next several months. Backlogs will continue to fall but will remain lofty at the beginning of 2019.  Class 8 orders for the past 12 months have now totaled 482,000 units.

“Order rates right now are not that relevant because of the record-breaking totals recorded in June and July last year,” said Don Ake, FTR vice president of commercial vehicles.\

Fleets got a jump on ordering to reserve 2019 build slots, so orders had to fall off at some point, and December was the start of it, he said.

“Because orders rates are reduced, they are not currently a good barometer of long-term demand. All the orders are in, the question now is how many of these orders will actually be built? We will have to watch the build rates and retail sales closely for clues about the future strength of the Class 8 market,” Ake said. “FTR is forecasting freight growth to ease back some from the 2018 peak, but remain vibrant for the first half of 2019. At some point, the economy and freight growth will moderate and truck builds will decline. Then order cancellation rates will rise.”

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July trailer sales up slightly, but below last year; used Class 8 sales fall again

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Both ACT Research and FTR reported trailer sales in July as being up slightly over June, but still far below the same month one year ago. (Courtesy: GREAT DANE)

The nation’s two organizations that track and analyze data about the commercial motor vehicle market both note that trailer orders were up in July as compared to June but were still far below when compared with the same month last year.

One of the two organizations reported used Class 8 sales fell for the fourth consecutive month.

ACT Research said preliminary estimate for July 2019 net trailer orders is 9,900 units. Final volume will be available later this month. This preliminary market estimate should be within +/- 3% of the final order tally.

FTR reported preliminary trailer orders for July at 9,000 units, up 61% from dismal June numbers but 68% below July 2018. FTR said trailer orders continue to show weakness during the summer months after experiencing a record run in the second half of last year, noting that van fleets already have their orders in for 2019 and have not started ordering yet for 2020. Although currently, production remains robust at near-record levels, some easing of build rates is expected as backlogs fall significantly to where they were at the start of 2018, FTR said. Trailer orders for the past 12 months now total 324,000 units.

“While net trailer order volume improved significantly from June’s dramatically disappointing results, the industry’s year-over-year performance continued to be extremely weak. While net orders jumped 65% versus an amazingly weak June, they were 66%  below this point last year, a tough comparison to the first month of the record-setting order run-up of last summer and fall,” said Frank Maly, ACT’s director of CV transportation analysis and research. “While some fleets made investment commitments in response to the opening of some 2020 order boards, their overall response was lackluster. A few months ago, there was strong interest to push commitments into next year, but uncertainty over the economy, freight volumes, and capacity has now caused many fleets to move to the sidelines as they re-assess their true needs for either replacement of older equipment or additions to fleet capacity next year.”

On a positive note, Maly said the cancellation pressures of recent months appeared to ease a bit in July. However, any cancels are likely impacting fourth quarter production slots, so there is still some churn in order board occurring before year-end.

“That results in a fairly soft foundation for early next year. Also worth noting is that production continued at a solid pace in July, although OEMs definitely slid back from June’s frantic pace,” he said.

Don Ake, FTR vice president of commercial vehicles, said trailer orders should stay subdued in August but start to revive in September, as fleets determine their needs for next year. The environment remains uncertain, with freight growth slowing and the tariff situation in flux.

“The July order volumes continue to demonstrate a possible return to normalcy in the equipment markets. The low total is representative of a typical slow summer order month, and is very close to the July 2016 number,” he said.

As for the used truck market, Steve Tam, ACT’s vice president of research, said preliminary used truck sales fell 2% month-over-month, the fourth consecutive sequential drop.

Other data released in ACT’s preliminary report included sequential comparisons for July 2019, which showed that average prices fell 4%, while average miles climbed 2%, and average age was up 4%.

“Used truck prices are the hottest topic in the industry right now,” Tam said. “Many dealers are experiencing significant softening in prices, but the erosion is not uniform. Depending on a host of factors, experiences vary and a few factors that impact prices include customer, equipment specifications, location, and vehicle condition.”

ACT’s Classes 3-8 Used Truck Report provides data on the average selling price, miles, and age based on a sample of industry data. In addition, the report provides the average selling price for top-selling Class 8 models for each of the major truck OEMs – Freightliner (Daimler); Kenworth and Peterbilt (Paccar); International (Navistar); and Volvo and Mack (Volvo).

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ACT Research: Key risk to CV market forecasts is China trade wars

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This chart showing the U.S. dollar to Chinese yen (RMB), illustrates why trade wars are neither good, nor easy to win, an ACT Research official said, (Courtesy: ACT RESEARCH)

COLUMBUS, Ind. — According to ACT Research’s (ACT) latest release of the North American Commercial Vehicle OUTLOOK, the key risk to all commercial vehicle market forecasts remains the on-again trade war with China.

“This month’s chart, the U.S. dollar to Chinese yuan (RMB) illustrates why trade wars are neither good, nor easy to win,” said Kenny Vieth, ACT’s president and senior analyst. “As can be seen, after the U.S. fired the latest salvo in the trade war on August 1, the Chinese responded with in-kind tariffs and a 3% currency devaluation — so far. Since the first ‘shots’ of the trade war were fired on March 1, 2018, the RMB has fallen 12% versus the U.S. dollar.

“So, tariffs imposed by the U.S. have been met with in-kind tariffs from China, and the Chinese government has allowed the yuan to devalue, thereby offsetting the U.S. tariff impact, while simultaneously making US goods even more expensive in China.”

Vieth said the bigger risk, especially to emerging economies is that in order to compete with China, they will have to devalue their currencies, making US goods more expensive in more countries and raising the risk of a deeper global downturn.

ACT Research is a publisher of commercial vehicle truck, trailer, and bus industry data, market analysis and forecasting services for the North American and China markets. ACT’s analytical services are used by all major North American truck and trailer manufacturers and their suppliers, as well as banking and investment companies.

More information can be found at www.actresearch.net.

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ACT Research: Heavy duty markets at the edge of the precipice

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This graph by ACT Research shows freight growth will decline in 2020 and 2021 before accelerating in 2022, Class 8 truck productivity will remain in the negative through 2022 but will become less each year. (Courtesy: ACT RESEARCH)

COLUMBUS, Ind.  – According to ACT Research’s latest release of the North American Commercial Vehicle OUTLOOK, current data and anecdotes make a strong case that the heavy-duty vehicle markets are at the edge of the precipice.

“Since the start of this demand up-cycle in late 2017, we have targeted this year’s third quarter as the point at which the industry was likely to see production rollover,” said Kenny Vieth, ACT’s president and senior analyst. “That targeting was largely derived from historical precedent, with historical peak-level build lasting between 13 and 15 months. For the current cycle, we date peak build rates to June 2018, so August represents the 15th month of peak-level production.”

Regarding heavy vehicle demand, Vieth said, “At the heart of our cycle duration prediction, carrier profitability and production peaks always lag the freight cycle, so capacity building always accelerates relative to freight growth at exactly the wrong time, every time.

“Large new inventories and deteriorating freight and rate conditions suggest erring on the side of caution remains the right call, and we are warning those in the industry to be prepared for down weeks starting as early as fourth quarter.”

ACT Research is a publisher of commercial vehicle truck, trailer, and bus industry data, market analysis and forecasting services for the North American and China markets. ACT’s analytical services are used by all major North American truck and trailer manufacturers and their suppliers, as well as banking and investment companies.

More information can be found at www.actresearch.net.

 

 

 

 

 

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