Preliminary reports from both ACT Research and FTR show that North American Class 8 orders for February fell 18-20% from January. Both reported a total drop of 14,100 units.
“This is not good news for the trucking industry or the economy,” said Don Ake, vice president commercial vehicles at FTR. “It appears fleets have decided to delay some orders until the health crisis has passed," he said, referring to the Coronavirus outbreak. "There is no pressure for fleets to order more trucks, since most carriers have enough capacity to handle current freight volumes.”
This is the lowest order activity for the month of February since 2010. With fleets already being cautious in equipment purchases due to the flat freight market and slowing economy, the COVID-19 virus has created more uncertainty. Orders had been right at replacement levels for four months, but now it appears fleets will take a pause in replacing older trucks until current anxiety dissipates, according to FTR. Class 8 orders have totaled 177,000 over the past 12 months.
“Weak freight market and rate conditions, as well as a still-large backlog, continue to bedevil new Class 8 orders,” said Kenny Vieth, ACT’s president and senior analyst. He continued, “February is not a particularly strong Class 8 order month [normally], and this February’s results, seasonally adjusted, were the weakest monthly order rate since last August. With COVID-19 becoming a hot topic at the end of February, one wonders if that impacted order activity.”
ACT noted that the coronavirus outbreak has not affected medium-duty vehicle orders as much, as that segment reported a third consecutive month of solid orders. Additionally, according to ACT Research’s recently released Transportation Digest, key truck transportation metrics continued to give mixed signals in early 2020. The report shows that the total medium-duty market closed 2019 on a positive note, with all indicators improving sequentially in December, while the US trailer segment closed 2019 on weak net orders, well below seasonal expectations.
“It is going to be a capacity rationalization year, that hopefully will go a long way in restoring the supply-demand balance between trucks and freight,” said Vieth, adding, “In 2019, the medium-duty sector saw moderate gains in production and sales, but weakening demand in late 2019 set a course for an overall decline in 2020. Anecdotal information from the trailer market points to price concessions occurring to incentivize order placements, in hope that those incentives will help to soften anticipated large declines.”