May Truck Orders Remain Constrained by Supply Chain

North American Class 8 truck orders for May were between 13,300 units and 14,000, according to FTR and ACT Research preliminary estimates.

FTR notes its 13,300 estimate is the lowest total since November 2021. May order activity was down 13% month over month and down 43% from a year earlier. Class 8 orders have totaled 270,000 units over the last 12 months.

FTR explains that truck makers are quickly running out of build slots for 2022, and with production still constrained by the supply chain, especially semiconductors, they cannot increase build rates this year. OEMs are not booking many orders for 2023 yet because the cost of commodities and other components are inflated and variable, making accurate quoting difficult.

“The supply chain was making slight improvements in the last few months, but some of that progress stalled due to disruptions in China and Russia,” said Don Ake, FTR vice president of commercial vehicles. “The OEMs are not confident they can increase production in the second half of the year; therefore, they are not able to take more orders.”

Nevertheless, he said, demand for new trucks remains healthy. Freight is growing and fleets need more trucks to keep up with customer demands and to trade in older vehicles. The supply of new trucks has been running way behind demand for over a year now, and many fleets need to catch up to their replacement cycles.

“This is like ticket sales for a popular concert,” Ake explains. “At the beginning, sales are high because there are plenty of seats available. But at the end, fewer tickets are sold because there are fewer seats to sell. There just aren’t many build slots still open in 2022. Orders could even slide under 10,000 in the summer months before the cycle begins for next year.”

‘Mild Improvement’

ACT Research estimates showed Class 8 net orders in May were 14,000 units, while Class 5-7 net orders moderated to 17,000 units. 

“We are coming to that time of year when orders tend to be seasonally weak, as OEMs typically have yet to open their forward-year build schedules, as is currently the case for 2023,” said Eric Crawford, ACT vice president and senior analyst. “Thus, May’s sequential decline in Class 8 orders from April actually reflects some mild improvement on a seasonally adjusted basis.

“So despite broader macro uncertainty about Russia/Ukraine, interest rates, and potential recession, the prevailing theme in trucks is largely unchanged,” Crawford said. “Long backlogs and supply-chain constrained production continue to keep new orders trending within a narrow range.”

Regarding the heavy-duty segment, Crawford noted, “With Class 8 backlogs stretching through 2022 and still no clear visibility on the easing of the all-things shortage, May’s net orders reflect a mild upside surprise, albeit one still in line with the ongoing conservative approach by OEMs looking to limit the risk of overbooking and underbuilding that plagued the industry in 2021.” About medium-duty, he said, “May’s order moderation for Classes 5-7 follows this segment’s near all-time backlog levels in April.”

Light at the End of the Tunnel?

Daimler Truck officials told Bloomberg that they see signs of the chip shortage easing. Daimler Truck’s Karin Radstrom said the world’s largest truck maker has so far evaded disruption from coronavirus lockdowns in China.

“It’s better, it’s not perfect, but it’s better than last year,” Radstrom said in an interview with Bloomberg. “I try to not celebrate too early; we’re still monitoring the situation closely.”