Trade Uncertainty Stunts Class 8 Truck Orders

Preliminary September orders for Class 8 trucks improved over August but remained stagnant as fleets delayed booking new equipment in the face of ongoing trade tensions slowing swaths of the manufacturing economy.

ACT Research pegged September Class 8 orders at 12,600 units. FTR Transportation Intelligence counted 12,100 orders. Both numbers are about 70% below the same month in 2018, and mostly represent replacement of older models. Final numbers will be released in mid-October.

More of the same

"Little has changed since August with respect to the freight market and freight rates, while uncertainties surrounding trade and tariffs continue to weigh on truck buyers' psyches," said Steve Tam, ACT vice president. 

Class 8 orders are stuck at the bottom of the cycle, said Don Ake, FTR vice president of commercial vehicles. The rolling 12-month average for orders is about 214,000.

"All the orders needed for 2019 were placed months ago and fleets are now adjusting delivery dates and finalizing requirements," Ake said.

Factory downtime

The slowdown is rapidly shrinking the backlog of trucks awaiting assembly. ACT predicts the number of unbuilt trucks in queue to fall to 135,000 in September, down from 151,000 in August.

With more late 2018 and early 2019 orders being filled, the number of available used trucks is rising, which is leading to lower prices in that sector.

Volvo Trucks North America and Mack Trucks, both units of Volvo Group VLVLY, are taking two down weeks at their Virginia and Pennsylvania factories this quarter. Navistar International Corp. NAV is reducing its build by 15% at plants in Ohio and Mexico, resulting in temporary layoffs. The Lisle, Illinois-based company increased build rates during the 2018 order boom.

Medium-duty weakness

Weak orders also are impacting the Class 5-7 medium-duty truck market. Those trucks often move consumer goods, an enduring segment in the current economy. Month-over-month orders were down 9.4% to 17,300 units. 

"Given that two of the past three months have been at levels not seen since mid-2016, this would seem to suggest that the consumer economy is starting to crack under the strain of ill-considered economic policies that are heavily impacting the manufacturing and agricultural sectors of the economy," Kenny Vieth, ACT president told FreightWaves.

ACT predicts a pullback in build rates for both heavy- and medium-duty trucks in 2020. FTR is slightly more upbeat, predicting higher orders in October as normal industry ordering trends resume after a surge of pull-ahead of orders were placed in 2018 to assure build slots this year.

"We believe we see a stable environment through the first quarter [of 2020], and then we'll have to see how the seasonality of additional orders that are coming in from larger customers plays out through the year," Navistar CEO Troy Clarke said on the company's September 4 call with analysts.

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