Mack Trucks began a planned layoff of 400 workers last month in response to falling truck demand Photo by Sean KilcarrFleet Owner

Equipment

Order backlogs won’t relieve downward pressure on truck production

Feb. 19, 2016

January Class 8 orders fall, medium-duty orders flatten, and trailer orders drop.

Orders for Class 8 trucks continued sliding in January, while Class 5-7 medium-duty orders flattened out, all in spite of a growing truck order backlog.

“Class 8 demand started softening in mid-year 2015 [yet] the industry starts 2016 with the second largest January backlog in the past 10 years and the fourth biggest in the past 15,” noted Kenny Vieth, president and senior analyst of ACT Research, in a statement. “In spite of the large backlogs, production rates of Class 8s … are likely to moderate in coming months as the industry works through excessive inventories.”

ACT said Class 8 net orders totaled 18,247 units in January, down 48% year over year, while Class 5-7 net orders remained flat year-over-year at 17,400 units.

“The data stream continues to trend negatively in regard to freight, capacity, and freight rates,” Veith added.

“Meanwhile, medium duty is well positioned for continued modest growth into 2016,” he said; a trend he attributes to healthy consumer balance sheets, rising new home construction, improved state and local government budgets, and an absence of overbuying.”

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On the trailer side of the industry’s equipment ledger, research firm FTR said net orders topped 17,900 units in January, a 30% decline from December and 37% below the same month in 2015.

Much of that decline is due to dry van orders being the lowest they have been since May of 2015, noted Don Ake, FTR’s VP of commercial vehicles, combined with weak flatbed orders for the month.

By contrast, refrigerated van orders were at a reasonable level for January, he said in a statement, up 33% from December.

Overall trailer build increased January, albeit marginally, at a 3% increase, Ake pointed out – impacted primarily by an improvement in dry van production with some added numbers for flatbed trailers as well. Most other trailer segments showed weaker month-over-month production levels, with the tank trailer segment remaining weak and dump trailers volume holding at a steady level.

“Normally this would be a poor order month for January, but these are far from normal circumstances,” Ake explained. “Orders averaged over 33,000 for the previous four months, so a pullback of this magnitude was totally expected. Most large fleets have their orders in for the first half of the year [and] there are not many open build slots left.”

He added that order backlogs for dry van trailers are “very robust” so even if there are several weak order months, production should hold steady the first half of 2016.

“However, last year the market was on the upswing, and this year it is cooling off somewhat,” Ake stressed. “Trailer production is expected to outpace truck production for the next several months.”