July Heavy-Duty Truck Orders Set Record For Any Month

August 03, 2018 by Alan Adler, @AlanAdler

Motor carriers, scrambling to have enough trucks in their fleets to meet torrid shipping demand, placed record orders for heavy-duty trucks in July.

Last month’s preliminary tally of 52,400 heavy-duty trucks orders demonstrated fleets are betting on rising freight orders even though they won’t get their new trucks until 2019. It was a record for any month.

The blockbuster month came on top of 41,800 orders in June. July is typically the slowest month of the year for Class 8 truck orders, followed by June and August, said industry analyst Steve Tam, vice president at ACT Research Co. in Columbus, Ind. The July increase was 180 percent compared with July 2017 and 24 percent higher than June.

“Typically, we refer to July as the order desert,” Tam told Trucks.com. “It is obviously a vote of confidence from the industry that things are going very well.” He said orders likely are being pulled ahead from October, which historically is the biggest month.

While build dates for the July orders won’t be available until mid-August, Tam said based on June, the majority of units for Daimler Trucks (Freightliner and Great Western), Volvo Group (Volvo Trucks and Mack), Navistar (International) and PACCAR (Peterbilt and Kenworth) will be built in the first half of 2019.

“What has happened is the cycle has peaked, and it’s stuck up there,” said Don Ake, vice president of commercial vehicles at FTR Transportation Intelligence in Bloomington, Ind. “Fleets are ordering six or more months out in hopes they’ll be able to get trucks in six months.”

Ake said the typical boom-and-bust truck sales cycle is complicated by freight orders increasing as the U.S. economy expands faster than expected. The nation’s estimated gross domestic product grew 4.1 percent in the second quarter.

Trucking productivity declined this spring when enforcement began of the federal Electronic Logging Device regulation that tracks how many hours a driver is behind the wheel. A persistent shortage of drivers, estimated by the American Trucking Associations at 51,000 and rising, is delaying deliveries, That allows shippers to charge more per load.

Green Bay, Wisc.-based Schneider National Inc., which operates one of the nation’s largest trucking fleets, reported second quarter net income Thursday of $65.8 million, up 42 percent from the same quarter in 2017. On a conference call with analysts, the company said capacity constraints led it to turn down a record number of freight orders in July.

Businesses typically try to sign annual contracts with fleet haulers to avoid price increases. When they have more loads than their contracts allow, they take the extra business to the so-called spot market, where independent operators pick up the slack. Since last September, those drivers have been collecting 10-20 percent premiums on a load, but many deliveries are delayed.  The result: higher prices for a reduced level of service.

“This is one of these disruptions where everybody is stressed and under pressure,” Ake said. “The fleets are making money. The owner-operators are happy because they’re rolling in money this year.” When shipping rates fall, which they eventually will, financial times will be harder for the independents.

Balancing truck orders and freight demand likely won’t come until 2020 at the earliest, Ake said. An economic downturn could lead cancellation of some orders. Truck makers typically do not penalize their customers.

“At some point there’s going to be a giant washout,” Ake said. “You can go ahead and try to charge them if you’re willing to never have them as a customer again.”

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