The increasing pace of truck and trailer orders is leading many OEMs and analysts to raise their equipment sales forecasts for the year.
For example, Volvo Trucks North America (VTNA) recently raised its forecast for U.S. Class 8 sales this year from 220,000 units to between 230,000 to 240,000 units.
“The order rate is so high now that we’ll reach a natural ‘ceiling’ soon in terms of how many trucks we can physically produce this year,” Ron Huibers, VTNA’s senior vp-sales and marketing, told Fleet Owner at the company’s New River Valley plant outside Dublin, VA.
Paccar, which builds both Peterbilt and Kenworth trucks, also raised its sales forecast for 2011. At the 2011 Mid America Trucking Show, Peterbilt GM Bill Jackson estimated total industry Class 8 sales would reach 210,000 units this year, with medium-duty sales reaching 50,000 units.
Yet, by April Paccar widened its sales projections range for Class 8 vehicles to between 200,000 and 220,000 units. “Class 8 industry retail sales in the U.S. and Canada in 2011 are improving steadily,” said Dan Sobic, Paccar’s executive vp, in the company’s first quarter earnings report.
“The industry retail sales forecast has been increased to a range of 200,000-220,000 vehicles – the best year since 2006, [although] there are industry concerns about suppliers being able to increase their production capacity to meet global demand,” Sobic added.
Jim Hebe, Navistar’s senior VP for North American operations, is more cautious in his outlook due to the growing “supplier crunch” affecting all truck makers.
Truck makers may see an increase in new truck orders beyond already strong numbers, “but they won’t get built because of [capacity problems with] the supply base,” Hebe said at a recent press briefing. “We can’t raise production much beyond where we are right now because of supply issues.”
Still, orders – and truck production backlogs – continue to grow. FTR Associates recently noted that the order volumes in February, March, and April indicating annual demand of around 362,700 Class 8 units for the U.S., Canada and Mexico.
In April, North American Class 8 net orders totaled 38,100 units, according to consulting firm ACT Research Co. This has resulted in the Class 8 order backlog of over 126,000 units, the biggest backlog the industry has experienced in five years.
“Needless to say, open build slots remaining in 2011 are filling rapidly,” noted Kenny Vieth, ACT’s president and senior analyst. “At current fill rates, the 2011 build schedule could be completely filled sometime in July.”
“We’ve actually increased our [plant] capacity twice in very short order, in August 2010 and this year in March,” VTNA’s Huibers added. “Now, the pace of the order increase we’ve been experiencing is starting to temper a little bit, but that’s not a bad thing; that allows us to maintain reasonable delivery times for customers.”
He noted that “inflationary pressure” seems to be driving many trucking companies, large and small, to buy new equipment. “Our customers are watching the cost of fuel and tires, among other goods, rising fast this year, and are faced with a fleet that’s far older than historical norms. So many fear that if they wait to buy trucks in 2012, they’ll cost a lot more.”
Still, Huibers is quick to point out that demand so far is very “scheduled” and does not reflect what he dubbed the “panic buying” mentality that ran rampant in 2006 ahead of the implementation of tighter diesel engine emission regulations in 2007.
“The characteristic that we see in this market is the scheduling of new truck orders over a longer term; that’s a key factor in this sales upswing,” he stressed.
The order backlog in regards to commercial trailers is getting bigger, too. According to ACT, commercial trailer backlogs topped 101,244 units in April, even though net orders posted a 30% decline from March.
ACT’s Vieth pointed out that the downturn in orders isn’t of huge concern since the trailer manufacturing backlog has increased 141% compared to the same time last year, while build was nearly double the rates witnessed in April 2010.
“The industry’s normal order pattern actually calls for a strong first quarter followed by a mid-year lull,” added Frank Maly, ACT’s director of commercial vehicle transportation analysis and research. “April net orders were the start of that seasonally anticipated lull.”