Supply Chains Woes Cause Sharp Fall in Class 8 Orders: Analysts

Two trucking industry research firms report significantly weaker Class 8 order activity in July compared to previous months.

FTR Transportation Intelligence reports preliminary July orders at 10,600 units, the lowest level since last November; while ACT Research reported July orders slightly higher, at 11,400 units.

Order activity was the weakest for the month of July since 2019, down 33 percent from June this year and 60 percent lower year-over-year, according to FTR. Class 8 orders have now totaled 244,000 for the past 12 months.

Not surprisingly, the decrease is being attributed mainly to supply chain shortages and disruptions as OEMs have essentially run out of build slots for 2022 and are not yet entering orders for 2023, according to FTR. Continued supply chain disruptions are limiting OEM output in 2022 and the fluctuating cost of materials and components has caused delays in confirming orders for shipment next year, according to FTR. However, demand for new trucks remains brisk, the FTR release said.

“Orders, though paltry, met expectations since OEMs have filled almost all available build slots this year,” said Don Ake, vice president of commercial vehicles for FTR. “July is typically the weakest order month of the year, so it is no surprise orders dipped to around 10,000 units. Fleets continue to shop around, looking for available trucks, but they are becoming increasingly difficult to find. The supply chain is improving very slowly, but not nearly enough to meet demand.”

“It’s like when popular concert seats are sold out, you get no sales the next day,” Ake added. “Class 8 trucks are popular and in scarce supply in 2022. The OEMs just don’t have the capacity to meet the high demand this year. OEMs could increase production by about 10% over the current rate if they could get the parts, but the supply chain remains clogged.”

Eric Crawford, ACT’s VP and senior analyst, said his firm saw the possibility of something more in the July numbers than just a typical seasonal slowdown.

“Do we think July’s weak orders represent the end of healthy demand? Perhaps,” he said. “Recent spot rate weakness, and our expectation that a freight recession is inbound, would suggest yes.”

 “That said, considering 1) Class 8 backlogs stretch into 2023, 2) ongoing supply-chain issues, albeit easing somewhat, and 3) inflationary cost pressures, leave the OEMs in no rush to open order boards for 2023,” he added. “In light of this confluence of factors, plus typically challenged seasonality in Q3, we hesitate to extrapolate too much from a data point that could prove to be an outlier. To be sure, though, it is a data point that warrants increased vigilance going forward.”

Despite the economic uncertainty, demand for new trucks is expected to remain robust in 2023, FTR concluded. “When booking commences for 2023, possibly as early as September, Class 8 orders could reach record heights,” said Ake.

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