Heavy-Duty Truck Orders Surge in 2017, Strong 2018 Forecast

January 10, 2018 by Clarissa Hawes

The heavy-duty truck business roared back last year as an improving economy and growth in manufacturing spurred freight demand.

Sales of trucks in the heaviest Class 8 weight segment surged 59 percent to 296,440 vehicles in 2017, according to ACT Research.

Other research firms have logged similar gains. FTR Transportation Intelligence estimated that orders for trucks in the largest segment jumped 60 percent to 290,000 vehicles last year. Both sets of figures are for North America.

“It was a good year for us in 2017, particularly on the work truck side as economic conditions improved and business picked up in the construction, housing and infrastructure markets,” said Matt Kilgore, regional sales manager for MHC Kenworth in Kansas City, Mo.

The improved health of the trucking industry is also reflected in the rates motor carriers charge businesses to move goods.

Spot freight rates for vans — regular rather than refrigerated or flatbed — hit $1.81 per mile in December, according to industry data provider DAT Solutions. That’s up nearly 21 percent from the same month a year earlier.

There were roughly nine loads for every available truck on the spot freight market in December, DAT reported Monday. That was the highest monthly average ever recorded by DAT. December’s ratio was 139 percent higher than it was in the same month a year earlier.

“Steady economic growth led to a pickup in freight in the second half of the year,” said Steve Tam, vice president at ACT Research.

The truck brands also have launched a market share war, offering especially attractive deals.

“Truck manufacturers are discounting heavily,” Tam said, “fanning the flames of the already hot market.”

Much of the increasing demand for trucks comes from improvement in the manufacturing sector of the economy, said Jonathan Starks, chief operating officer at FTR.

Manufacturers added 196,000 jobs last year, a 1.6 percent increase over 2016, when employment in the sector dipped slightly, according to the Bureau of Labor Statistics.

“Manufacturing ended 2017 on a strong note and is expected to remain solid for most of 2018,” Starks said.

Motor carriers are trading up to trucks equipped with the latest safety equipment and connectivity innovations, including remote, proactive diagnostic and repair planning to make sure their trucks stay on the road and out of service bays, said Magnus Koeck, Volvo Trucks North America vice president of marketing and brand management.

“We think it’s going to be a good retail year for Class 8 trucks in 2018,” said Jeff Sass, senior vice president of Navistar’s North American truck sales. “Freight rates are up and there are more loads than drivers right now.”

“The economy is providing a lot of freight to be hauled and that’s good for our customers and manufacturers,” Sass said.

All this adds up to a turnaround for truck manufacturers. As sales slumped in 2016, the companies trimmed back employment at their factories, shedding thousands of jobs.

There were “too many trucks chasing too little freight,” Tam said.

It’s the exact opposite of current conditions. There was no growth in freight demand from mid-2015 through the first half of 2017, he said.

Now truck companies are hiring workers back to meet the increased vehicle demand. Volvo Trucks has offered jobs back to the workers it cut from its Dublin, Va., factory last year and is looking for several hundred new hires, spokesman John Mies told Trucks.com. The factory employs about 2,400 workers.

Similarly, Mack Trucks, also owned by Volvo, is adding about 400 workers to its Lower Macungie Township, Pa., assembly plant and plans to raise employment there to a record 2,400 workers this year.

The current robust market also comes as small- and mid-sized fleets and work truck buyers are placing more orders, said Michael Baudendistel, an analyst at Stifel Financial Corp.

The market will continue to grow this year. ACT estimates that manufacturers will receive orders for 305,000 Class 8 trucks, which would be a 19 percent gain.

“We expect everything that took place in 2017 to continue through most, if not all, of 2018,” Tam said.

The 2018 order season is off to a good start as trucking fleets react to the rate increases, Baudendistel said.

“With more money in their pockets, trucking companies will have a greater ability to invest in their fleets in 2018,” Kenny Vieth, president of ACT Research, told Trucks.com.

New orders for Class 8 trucks in December jumped to 37,500 vehicles, a 76 percent gain compared with the same month a year earlier, according to ACT.

A contributor to rapidly rising shipping rates is a new rule that went into effect last month that forces truckers to equip their vehicles with electronic logging devices, or ELDs.

ELDs link to a semi truck’s engine, capturing the movement and recording how much time a driver spends behind the wheel, to ensure they are following federal work rules. Truckers must comply with a federal hours-of-service rule limiting drivers to no more than 11 hours a day within a 14-hour workday. Drivers must then be off duty for 10 consecutive hours.

Some drivers have left the industry rather than comply with the new rule. That’s contributed to the imbalance between the loads of freight looking for delivery and the number of trucks available to haul the cargo. It also is slowing the delivery of freight as truckers have to stop driving to comply with the federal driving rules. That’s contributed to the shortage of trucks available to take new loads.

The result is tighter capacity and increased demand for new trucks, Starks said.

Read Next: Popularity of Pickup Trucks Drive 2017 Auto Sales

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