While it’s certainly not boom times for truck and trailer manufacturers, orders for equipment of both stripes continues to strengthen as freight haulers generate strong revenues and remain optimistic about the health of the U.S. economy.
“We see a number of factors coming together to keep orders strong – not just for Class 8 trucks, but for trailers too,” Kenny Vieth, senior partner and gm for ACT Research Co., told FleetOwner.
“The U.S. economy is healthy enough, truckers are making money, and they haven’t bought significant amounts of new equipment in three or four years, so the fleet is old and needs replacing,” he said.
As a result, net Class 8 orders for North American markets are increasing, with 24,300 net orders in February pushing the Class 8 production backlog to just under 100,000 units, Vieth said, noting that just one year ago the backlog was only about 44,000 units.
Taken together, Class 8 orders for January and February indicate an annualized “booking rate” in excess of 300,000 units, Vieth added. “This uptick in orders continues to restock industry backlogs, setting the stage for significant production increases as we move through 2011,” he said.
On the trailer side of the ledger, ACT noted net orders increase to 21,990 units in February, a gain of over 25% from January, with factory shipments posting a 105% gain last month versus February 2010.
The firm added that nine trailer categories – dry vans, flatbeds, tankers, etc. – have posted year-over-year gains for both net orders and factory shipments, with dry van net orders up over 90% and shipments up almost 225% year-to-date.
“The ramp-up in orders that we’ve been tracking has continued into 2011, with year-to-date total net orders up over 87% compared to 2010,” said Vieth. “Shipments are up an even stronger 116% when compared to the first two months of 2010, with rising backlogs setting the stage for solid industry performance this year.”
And while diesel fuel costs are high as a result of the ongoing spike in oil prices, continued tightness in trucking capacity, especially in the TL sector, is allowing fleets to only collect surcharges for fuel as well as what Vieth calls “premium” freight rates.
That trucking capacity crunch is only expected to worsen this spring for shippers, according to data tracked by FTR Associates. The firm’s Shippers Condition Index (SCI), which measures access to truck capacity, remained in low territory in February with a value of negative 5.2, and FTR expects the index to fall further as the outlook for capacity shortages worsen in the seasonally strong spring months.
ACT’s Vieth also pointed out that the increase in Class 8 orders is being felt more strongly in Canada and Mexico than in past recoveries. “Back in the 1990s, out of that 300,000 order volume, about 85% would be from the U.S. market,” he said. “Over the last five months, though, the U.S. market has only been the source of 70% to 71% of that [order] volume. Canada’s going great guns right now, and orders for export are off the chart.”
FTR added that its data indicates net order activity has been strengthening for some time, with order volume annualizing to 251,900 units from August 2010 thru January 2011, with the November thru January numbers alone annualizing to 319,500 Class 8 trucks. That figure includes U.S., Canada, Mexico and export units.
“With the recent sustained higher levels of order activity, 2011 is shaping up to be a very good year especially relative to where we were in 2009,” said Eric Starks, FTR’s president.
Still, ACT’s Vieth cautioned that the current strength in truck and trailer orders should not be construed as a “free for all” reminiscent of past manufacturing booms in the trucking space. “Big fleets – both private and public – as well as leasing companies are back buying equipment, but lending is still constrained,” he said.
FTR’s Starks is also more reserved when it comes to gauging the long-term impact of the current order uptick.
“My sense is, up to this point, things are going well,” he told FleetOwner. “But from a long-term assessment, I can’t see order activity building up further due to growing uncertainty over oil prices, inflation, and the impact of [the tsunami] in Japan. Fleets we’ve talked to are still optimistic, but just far more cautious in their outlook than a couple of months ago.”