Truck orders down in July, yet positive momentum remains

Despite a big dip in truck orders from June to July this year, most analysts believe orders are going to keep strengthening through the end of 2010 as carriers continue to pocket increased profits due to a growing shortage of capacity

Despite a big dip in truck orders from June to July this year, most analysts believe orders are going to keep strengthening through the end of 2010 as carriers continue to pocket increased profits due to a growing shortage of capacity.

“Normal seasonality accounted for about a third of the month-to-month decline in Class 8 net orders,” noted Kenny Vieth, partner and senior analyst with consulting firm ACT Research Co. “The momentum in Class 8 demand is still increasing as trucking company profitability continues to rebound strongly.”

ACT said July net orders for heavy-duty Class 8 commercial vehicles totaled 11,667, a decline of 27% from this past June, but an increase of 27% over July 2009. ACT added that net orders of medium-duty Class 5-7 trucks increased both month-to-month and year-over-year, with net orders up 100% in this July over the same month in 2009.

“Lack of capacity right now is good for rates, so we see carriers growing profits first before they contemplate any expansion efforts to attract more business,” John Burton, ACT’s vice president-transportation sector, told Fleet Owner earlier this month.

“Even with modest economic growth, commercial vehicle demand should continue to rise as carriers appear to be replacing an aging fleet but not adding capacity,” Burton added. “Demand for new heavy-duty vehicles continues to be well below normal replacement levels, meaning overall fleet capacity is shrinking due to scrappage and export of used tractors. This will allow truckers to retain pricing leverage and profits.”

Steve Tam, vice president-commercial vehicle sector at ACT Research Co., also believes Class 8 orders are going to 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 Fleet Owner earlier this summer. “For example, by tradition the third quarter of the year is the slowest time 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.”

“Right now, we’re sitting at a nine-month average of 12,000 net Class 8 orders per month. If we were to be in a stronger growth mode, we’d see that order-level up around 20,000 per month,” added Eric Starks, president of research firm FTR Associates. “That’s the next benchmark that’ll indicate significant economic improvement.”

TAGS: News
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish