Retail sales of Class 8 trucks in January were down very modestly compared to new orders, which plummeted. January Class 8 retail truck sales are down 3.5% to 18,555 compared to the same month last year, according to WardsAuto.com. This drop off was relatively flat compared to a 75% reduction in new orders to 11,000, according to A.C.T. Research.
The 75% drop in new orders was the largest year-over-year decline on record, according to investment banking firm Bear Stearns.
“The falloff in Class 8 production is occurring much faster than the falloff in Class 8 retail sales because there are still inventories of ’06 engines of dealer lots,” Chris Brady, president of Commercial Motor Vehicle Consulting told FleetOwner. He added that OEMs still delivered trucks with ’06 engines in January.
Brady forecasts that Class 8 truck retail sales will draw down gradually in February and March before falling sharply in the second quarter when inventories of trucks with ’06 engines get whittled down. Trucks with ’07 engines are equipped with EPA-mandated emissions reduction technology, making them considerably more expensive than their ’06 counterparts and consequently less desirable, evidenced by the 75% plunge in new orders.
Meanwhile trucking companies faced a slowdown in freight volumes just as transportation capacity grew thanks to fleets prebuying trucks with ’06 engines to avoid the costlier ’07 trucks. This sparked a more competitive freight environment, and weaker fourth quarter earnings.
For more information, read Trucking suffered in 4Q
But the U.S. economy grew a solid 3.5% in the fourth quarter; which contradicted many trucking executives that claimed the economy was slowing. The reason behind weak trucking earnings amidst a strong economy was bloated inventories, CMVC’s Brady told FleetOwner.
The manufacturing sector had contracted in January, according to the Institute for Supply Management. However, ISM also reported that in January manufacturers saw the largest month-to-month decline in inventories since 1984.
“If you’re depleting inventory that quickly that probably means orders were strong as well,” Brady said, adding that once inventories stabilize, manufacturing-related freight will likely rebound modestly starting as early as late February.
For more information, read Freight volumes still slowing
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