“Things are a little bit crazy now,” said FTR Chairman and CEO Eric Starks, kicking off an equipment outlook webinar held earlier this month as part of the freight forecasting firm’s wide-ranging Conference Virtual Series.
Given what the webinar’s speakers had to say, Starks’ remark will likely be the understatement of the year on the state of the truck and trailer markets.
To be sure, it’s a good news/bad news kind of crazy. While FTR forecasts “very strong” freight growth for this year and on into next, both truck and trailer OEMs are mired in “the worst supply chain shortage[s] since WWII,” said Don Ake, FTR’s vice president of commercial vehicles, which is causing them to park semi-built units due to parts shortages.
“We’re in catch-up mode and we’re going to be in catch-up mode for a while,” he said. As the drag on the global supply chain for manufactured goods continues unabated, the number of “red tag” units keeps climbing.
Ake estimates there are already from 13,000 to 20,000 Class 8 trucks that are not yet completely built because of they need semiconductors as well as other parts. These red-tagged trucks must be parked even as truck builders aim to keep up with demand. He said that red tagging extends to trailer building as well.
Starved for Parts
While noting that the worldwide drought in semiconductors is the biggest issue, Ake stressed that some 20 to 40 parts critical for building trucks and trailers also remain hard to get.
The Class 8 backlog alone stands at 268,334 units. Ake said that will hit record numbers once OEMs fully open up their 2022 order boards.
“OEMs are very cautious about booking 2022 orders,' he said. "They don’t know what price to quote, and they’ve had to put in, in some cases, surcharges.”
He said trailer builders also have not started taking orders for 2022.
“We expect record [trailer] backlogs above the 237,000 recorded a couple years ago,” Ake pointed out. He noted that in this environment, inventories at truck dealers are critically low.
“Their only source of income is used truck sales and maintenance, so they’re hurting a lot because they can’t get inventory," he said.
Against this edgy backdrop, the near-term outlook for the economic is plenty rosy.
“We see [2021 as] a very strong GDP year,” Ake said, “with 6% growth for the first and third quarters. Then GDP starts a slight downturn, only declining at a decent level, to see 2% or higher GDP by the end of 2022.”
More specifically, FTR expects the goods transport segment of GDP to grow at 4.5% in Q3 and rise yet higher to 6.8% in Q4. In the new year, it will moderate some, but even if that growth levels off to 3% by the end of 2022, Ake said that still will generate “a tremendous amount of freight.”
Another key freight measure that FTR keeps tabs on is truck loadings. Those are up about 6% this year, helping push up demand for both new trucks and trailers. Loadings are expected to grow about 3% next year and 2.2% in 2023.
Given the ongoing kinks in the global supply chain and the rise in domestic freight demand, Ake said that “OEMs won’t catch up with demand until 2023.” That’s why FTR’s equipment outlook calls for pent-up demand to continue into 2022 — and possibly into 2023.
FTR projects 360,000 Class 8 factory shipments in 2023. That would notch the second-best year ever. That’s up from 274,000 shipments expected and 335,000 forecast for 2022.
Meantime, North American trailer production is expected to reach 307,000 units in 2021 and climb to 374,000 in 2022. If that forecast holds up, next year’s trailer numbers will be the best ever. FTR also sees medium-duty truck demand remaining high, thanks to the continual rise in e-commerce orders and the resulting last-mile and home deliveries.
“We’ll be playing catch-up well into 2023,” Ake noted. He said to expect Class 8 demand to peak in 2023 and then to decline gradually. As for trailers, output should in 2022 and then enjoy a soft landing.
Behind the Wheel
Along with not enough trucks and trailers, not surprisingly there are not enough drivers to keep up with freight demand. Speaking during another webinar in FTR’s September online conference lineup, Avery Vise, FTR’s vice president of trucking, observed that in terms of the overall numbers of drivers, “We probably have more than we did before the pandemic.”
Aaron Terrazas, director of economic research for Convoy, contended that relevant labor and payroll data indicates that trucking employment “across the board is close to, or right at, or slightly above pre-pandemic levels.”
Pandemic or not, Greer Woodruff, J.B. Hunt’s senior vice president of safety, security and driver personnel, said the driver shortage is ever a matter of supply and demand.
"As long as there's demand that's outpacing supply, then there's an associated cost to the supply chain," he said.
“I happen to believe we have plenty of drivers,” he added. “We just don't use them very well."
Correction: Article updated 9/30/2021 to correct estimates of Class 8 trucks that are not yet completely built because of they need semiconductors as well as other parts. That number should be 13,000 to 20,000.