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E-commerce faces 'sharp slowdown' in 2021, IHS Markit says

March 12, 2021
The e-commerce sector carried the transportation sector during 2020, and as the economy opens up and the service sector rebounds, the balance of power will tip back toward heavy-duty trucks.

The pandemic-driven e-commerce and last-mile delivery boom might have propped up the sluggish trucking market during the turbulent 2020. After a shaky year, the trucking industry, as well as the rest of the U.S. economy, is poised for a big rebound — so long as COVID-19 continues to dissipate as more Americans receive vaccinations.

“Without a doubt, e-commerce played a strong role in the market in 2020,” Andrej Divis, director of automotive and global heavy truck research at IHS Markit, said during the virtual Work Truck Show 2021. “E-commerce helped to support freight, avoiding a larger collapse in Class 8 that would have otherwise been the case.”

While Class 8 sales fell in 2020, e-commerce drove an expansion in Class 5 vehicles over the past year, Divis said. “We see the e-commerce trend continuing to be strong in early 2021 through the second quarter of 2021.”

And if the economy continues to improve as COVID fears continue to dissipate, other trucking sectors could benefit as e-commerce slows a bit. But it won’t all be downhill for the industry that was shaken up during the uncertainties of 2020. 

“In the middle of the year, as COVID comes under control, and the service part of the U.S. economy reopens more fully — I'm thinking restaurants, hotels, events, all that travel — we do see the growth rate and e-commerce likely slowing sharply,” Divis explained. “We're not anticipating a reversal of the growth. But we are anticipating a sharp slowdown as people start spending money on other things such as services. This will be a bit of a headwind to truck sales, sort of balancing some of the other strengths.

2020 truck market recap

The medium- and heavy-duty vehicle market “collapsed by a fifth in the COVID year of 2020,” Divis said, citing IHS Markit data that is based on vehicle registrations from all U.S. DMVs. 

New Class 4 through Class 7 registrations were down about 10% across the U.S. in 2020. “While both medium-duty and heavy-duty lost volume in 2020, we see that the bulk of the contraction was borne by Class 8 — with sales having fallen more than 26% in 2020.”

While Class 8 market share dropped to less 50% of new MD and HD registrations in 2020, Class 5 surged to make up nearly one in every five new commercial vehicle registrations. “If 2019 was a remarkable year for Class 6, then 2020 surely was the year of Class 5. Class 5 stands out literally and figuratively, with the major increase in the share that it enjoyed,” Divis said. “Out of all the individual GVW classes, Class 5 was the only segment in 2020 that not only gained share within total (new registrations) but in fact increased volume significantly. This was partly due to some of the specific vocations that are present in Class 5 and surely was in part a reflection of the boom in e-commerce during 2020.”

On the other end of the registration spectrum, Class 7 vehicles saw the fewest registrations in the last decade and made up the smallest share of Class 4 to Class 8 new registrations last year. 

Smaller fleets also increased their share of Class 8 purchases in 2020. In 2018 and 2019, about half of all new Class 8 registrations were made by fleets with at least 501 vehicles. In 2020, the smaller fleets made up about 58% of the Class 8 share, according to IHS Markit data. 

OEM trends

Ford Motor Co. retained its solid position atop the medium-duty market (Class 4 to Class 6) in 2020. “Ford actually managed to increase its unit sales in Class 4 to 6, Divis said. “That in and of itself is a reflection of Ford’s strong position as well as the relatively good performance in particular of Classes 4 and 5 in an otherwise tough year.”

Chevrolet and International also sold more medium-duty units in 2020, which was the best year for both companies for Class 4 to Class 6 sales in at least eight years. “In both of those cases, those gains represent years of hard work and strategic change by the manufacturers in question,” Divis said. “In the case of Chevrolet, it obviously reflects a decision by General Motors to get back into the medium-duty commercial vehicle business in a bigger way — with offerings beyond its van cutaways — bringing to market products produced jointly with its partners at Isuzu and also at Navistar.

“In the case of International, these incremental gains seen in 2020 represent ongoing progress toward recovering market positions previously lost by the brand some years ago, supported by a very broad effort at product renewal, which has been taking place over the past few years.”

While Ford and Freightliner have held the top two positions in this market for years, the other top OEMs in medium-duty commercial vehicle market share saw some movement in 2020 new registrations: 

1. Ford
2. Freightliner
3. International (up from No. 5 in 2019)
4. Isuzu (down from No. 3 in 2019)
5. Ram (down from No. 4 in 2019)
6. Chevrolet (up from No. 7 in 2019)
7. Hino (down from No. 6 in 2019)

When looking at the entire medium- and heavy-duty OEM market — to include Classes 4 through 8 — the top truckmakers in 2020 were Freightliner, Ford, International, Kenworth, Peterbilt, Volvo, and Mack.

“Despite heavy exposure to Class 8, which declined very sharply, Freightliner remained No. 1 with nearly 120,000 units in 2020,” Divis said, which was a decrease from the nearly 150,000 new units registered in 2019. 

He added that Ford had nearly 100,000 new registrations last year — the first year since 2015 that the OEM fell short of 100,000. International was a distant third with about 40,000 new units, followed closely by Kenworth and Peterbilt. 

“When we look at market share, we see some brands did a little better in 2020, including Mack, Peterbilt and Western Star,” Divis said. “And that really reflects the relative strength of those brands, in particular, more on the straight truck side with relatively less exposure on the kind of for-hire tractor side. That's because when we look at tractors versus straight trucks in Class 8 overall, the greater relative decline was seen on the tractor side. As the economy went into lockdown in the spring, the straight trucks on the vocational side, tended to hold up a little better.  And that led and that led some of these brands like Mack, Peterbilt and Western Star to enjoy a little bit of a better relative position.”

Brands with “more balanced exposure,” such as Kenworth and Freightliner, saw a 2020 COVID decline more in line with the overall CV market, Divis noted. 

“2020 was not a good year for the tractor market or the brands that are selling into that market,” Divis said. “Straight trucks, meanwhile, enjoyed an above-average share. In addition to that, cab chassis did relatively well.”

Cab chassis made up 15% of the 2020 Class 4 to Class 8 market share, an increase from the closer to 10% share it has owned, according to IHS long-term data. Straight trucks made up about one in three of every new registration in 2020, which is higher than its 29% long-term average. Tractors typically make up more than 35% of the market, but in 2020, they made up about 31%.

Light vehicle market

Moving away from medium- and heavy-duty new registrations, light-duty sales (which include cars) fell by about 15% in 2020, which Divis attributed to the economic disruption of the pandemic. 

In Class 1 to Class 3, which make up the light-duty market, vans contracted the most (down 27%) in 2020, Divis said, while light-duty pickup trucks saw just a 7% decline last year. “So they held up relatively better than the light vehicle market overall,” he explained. “And within pickups, there are some stories there as well. We did see relatively greater declines in Class 1 and Class 2, but there was a real bright spot.”

That bright spot came in Class 3 pickups, Divis said. Just like Class 5 was “the big star” of the 2020 medium-duty market, Class 3 shone in the light-duty market of 2020.  “There are various reasons for that,” he said, citing affordability and adding: “We saw a much healthier development in some of the economic sectors where these trucks might be used, notably in construction.”

Divis credited this to housing starts and other construction work like remodeling increasing during the pandemic. “There was support from some major vocational markets for that particular segment gaining,” he explained. “When we crunched the data with some of our data providers and partners, one of the things we also found on the margin was increases in purchases of ‘towables’ — things like boat trailers, campers, and so on and so forth. That may have also played a role on the margin behind the Class 3 pickup increase, but certainly a great result for that vehicle category.”

Economy expansion on tap

After a rough 2020, Divis and IHS are expecting the U.S. economy to expand in 2021 thanks to the December stimulus and President Biden’s first major economic legislation, the $1.9 trillion COVID-19 relief bill, he signed March 11. Divis said this could lead to a 5.7% expansion of the U.S. economy in 2021 “in real terms compared to the prior year, more than making up for the entire contraction in 2020.”

IHS is also anticipating the economy to continue its expansion (more than 4%) in 2022. “There’s a lot behind that,” Divis said. “We see strong gains in consumer spending, even exceeding the top-line GDP numbers, that obviously is going to drive freight. That's a healthy sign for our industry. Also, if you look at residential fixed investments, (such as) housing starts, those numbers are really good for 2021: strong growth in residential investment, strong growth in housing starts. In 2022, we see easing, but they're still pretty good numbers.”

Divis also pointed to a healthy trend in business fixed investments. Like the trucking industry, other U.S. businesses are seeing strong capital goods orders, which is driving investments in the U.S. economy overall, he said. Along with a sharp increase in imports and exports this year and next, this would benefit the freight and work truck industries, he said. 

A caveat, however, is the pandemic. As winter winds down, more Americans are getting vaccinated from COVID-19 as cases continue to drop across the nation. “We're cautiously optimistic that the economy will be much more opened up in the summer than it has been pretty much since the beginning of the COVID epidemic,” Divis said. “Having said that, there’s of course uncertainties.”

Those uncertainties include new COVID variants and how well vaccines interact with the mutating virus.

About the Author

Josh Fisher | Editor-in-Chief

Editor-in-Chief Josh Fisher has been with FleetOwner since 2017, covering everything from modern fleet management to operational efficiency, artificial intelligence, autonomous trucking, regulations, and emerging transportation technology. He is based in Maryland. 

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