Sep 8, 2023

Class 8 Truck Orders See Significant Decline in August Sales

The trucking industry, which is often seen as an indicator of the overall health of the economy, has hit a roadblock with regard to Class 8 truck orders.

According to recent industry reports, August 2023 saw a significant decline in the sales of Class 8 trucks, which are the largest and most powerful haulage vehicles on the market. This has been happening for consecutive months now based on unit order levels. This decline in retail sales is a cause for concern for both manufacturers and operators in the industry.

The fall in actual unit truck orders is a result of several factors, including supply chain disruptions and the ongoing shortage of semiconductors that has been impacting the global manufacturing industry.

Additionally, high prices for raw materials and shipping costs by truck makers have added to the challenges faced by manufacturers and operators alike, further exacerbating the decline in sales.

This blog post aims to provide a detailed analysis of the recent decline in Class 8 truck orders, highlighting the reasons behind it and its potential impact on the industry.

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Statistics as of August 2023

In August, North American Class 8 orders experienced a decline of 12%, thus ending a three-month trend of positive year-over-year growth. What about this market analysis? 

The preliminary data from ACT Research revealed that orders reduced to 19,000 units from 21,600 during the corresponding period last year. Nonetheless, the report highlighted that August remained the best month since February, despite the decline. The market volume will match the retail market as long as there is freight growth and if freight rates are also better.

Additionally, seasonal adjustments and continued economic strength have been instrumental in maintaining orders on-trend.

The previous month saw a notable surge in orders, with a significant 18.8% increase resulting in a total of 16,000 units sold. It is a high units per month ratio for the heavy-duty market.

As per ACT Senor Analyst

According to Kenny Vieth, the president and senior analyst at ACT, the industry is currently experiencing a seasonally low period in terms of order activity. This is due to most of the current year's orders already being booked and the out-year build plans only just starting to open. Specifically, for Class 8, August marks the end of a four-month period, starting in May, known as the 'weak order season'. Moreover, the 2023 build plan has already been filled since the end of Q1, which is contributing to the downward pressure.

As per FTR Transportation Intelligence

According to FTR Transportation Intelligence, the number of orders for transportation units has experienced a significant decline of 28% in comparison to last year, with only 15,400 units ordered as opposed to 21,400.

However, it is important to note that the comparison may be slightly misleading as last year's results were particularly strong. In fact, this time last year marked the start of a period of increased order activity that lasted until November.

Considering the type of activity during the pandemic, with all the supply chain constraints and supply disruptions, it is expected that the Department of Transportation make adjustments. 

According to Eric Starks, the Chairman of FTR, fleets are beginning to place orders for the year 2024 as the build slots start to become available for production.

However, it is expected that the majority of the orders for 2024 will not be seen until September or October. Although there has been an increase in order production activity, the year-over-year comparisons are expected to look unfavorable through November due to the record order activity in the latter half of 2022.

It was observed by FTR in their recent report that the demand for new orders in the transportation industry has not yet reached the level of replacing older units. Moreover, their research has revealed that the number of Class 8 orders that were placed in the last 12 months amounted to 294,000 units.

According to Starks, it is more important to focus on the current levels of unit orders than the year-over-year change when assessing the market's strength in the short-term. Despite order activity being lower than replacement demand, the recent data shows that fleets are not hesitant to purchase new equipment. This is a promising indication for the latter half of the year.

The activity by fleets indicates the demand. Fleet customer are part of the key trends to monitor.

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As per the Environmental Protection Agency

The automobile industry is set to experience a significant transformation as the Environmental Protection Agency (EPA) recently proposed the most groundbreaking pollution standards for cars and trucks. The EPA's Greenhouse Gas Emissions Standards for Heavy-Duty Vehicles - Phase 3 outlines stringent regulations aimed at reducing greenhouse gas emissions from heavy-duty vehicles commencing in 2027.

Additionally, the California Air Resources Board and other state bodies have proposed their own regulations demonstrating a united front in the pursuit of cleaner air and a greener environment. These proposals represent a significant milestone in the journey towards a sustainable future and will undoubtedly have a positive impact on the environment and public health.

The trucking industry is facing a challenging period due to the upcoming greenhouse gas regulations that will come into effect next year. According to Kyle Treadway, the president of Kenworth Sales Co., this will require manufacturers to strike a delicate balance between zero-emission and diesel vehicles, which has made the ordering process more complex.

As an industry, they are still in the process of creating a system to manage this situation effectively. While allocation systems have been in place for a few years, Treadway notes that it remains a difficult task. In light of these regulations, truck manufacturers must make difficult decisions about how to allocate their resources effectively. They must prioritize building more electric or diesel trucks, which is a challenge that they are working to overcome.

The automotive industry must take extra care when delivering vehicles to ensure compliance with state regulations. Specifically, the California Air Resources Board (CARB) implements regulations that differ from those set by the Environmental Protection Agency (EPA).

As a result, industry professionals must be cautious about where these vehicles are sent and must prove compliance with state-specific requirements. This additional certification process can complicate the delivery process and requires careful attention to detail.

Treadway has embarked on a strategic venture to chart the build slots and allocate resources for the first half of the upcoming year. At present, end consumers have not been assigned to particular slots due to some unresolved factors, such as pricing. To ensure the highest level of customer satisfaction, Treadway is diligently working to acquire as much information as possible before customer orders are accepted.

Currently, the process of opening up order boards and allocating resources is underway, according to Treadway. At this stage, specific end-user names for slots have not been determined, nor has pricing been established. However, efforts are being made to prepare adequately for customer orders by providing satisfactory answers to their inquiries.

In Conclusion

To sum up, the drop in Class 8 truck orders in August is a clear indication that the pandemic's impact is still being felt in the transportation industry. The decrease in orders may also be attributed to supply chain issues and the ongoing semiconductor chip shortage. However, with the economy gradually recovering, it's expected that the demand for Class 8 trucks will rise again soon. In the meantime, manufacturers will have to adapt and innovate to meet the evolving needs of their customers while navigating the challenges of the current market.

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