Slump deepens for heavy truck orders

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Fleet Owner  /  August 3, 2016

Medium-duty orders down as well, but not steep as those for Class 8

A deep decline in Class 8 orders for the month of July is not surprising trucking industry analysts all that much, as both freight demand and rates remain subdued.

North American Class 8 orders slumped to 10,500 units in July, down 19% from June, down 57% year-over-year, and marking the lowest order level since the first quarter of 2010.

Orders for medium duty trucks – Class 5 through 7 – also declined in July, but not by as much as in the Class 8 segment. Class 5-7 orders dipped down to 14,500 units, down 4% from June and 6% year-over-year.

In line with the two-speed U.S. economy of healthy consumers and weak industrial activity, the two-speed commercial vehicle story continued to unfold in July.

Medium duty orders remained on trend, while Class 8 orders continued to soften, with some of that softness related to seasonality as of July-September, the traditional low ebb for Classes 5-8 vehicle orders.

Research firm FTR’s data indicated net Class 8 order volume for July dipped to 10,400 units, 56% below the same month in 2015 and the weakest month since February 2010 – dropping “annualized” Class 8 order volume to 210,000 units for the year.

“Usually there are a low number of cancellations in July, but not this year,” said FTR vice president Don Ake. “The high cancellations are likely the result of fleets placing large orders at the end of 2015, for delivery a year out.”

He added that without the cancellations, July orders would have been similar to June’s numbers. But with those cancelations included, month-to-month order volume dipped 19%. 

“Freight growth remains sluggish, so fleets are backing off expanding the number of truck,” Ake pointed out. “They are expected to continue to replace older units in the short-term, however. Orders should increase some in August.”

Another analyst noted that July’s Class 8 order volume is “about as bad as we expected” given that July again is a seasonally weak month for truck orders, with the market giving no reason to believe orders as trucking conditions remain poor or continue to deteriorate.

On the medium-duty side, that analyst is now lowering its production forecast due to a string of sluggish order months,

“Given three consecutive year-over-year declines in orders and some creep up in inventory levels, we are lowering our outlook for medium duty production [for] 2016 slightly to reflect flat production, down from our prior estimate of a low-single digit increase,” he said.

In terms of expected annual Class 8 production levels down the road, he is projecting a total of 230,000 Class 8 units for this year, down 29% from 2015, falling further in 2017 to 205,000 units (down 11% from 2016), before reaching 200,000 units in 2018 (down 2% from 2017’s estimates).

Other analysts offer a more robust Class 8 production picture, especially for 2018, with projections of about 236,000 units this year and 214,000 units in 2017, before a big spike back to 261,000 units in 2018.