Heavy-Duty Truck Orders Slow in December; 2018 Still a Record Year

January 07, 2019 by Alan Adler, @AlanAdler

Orders of heavy-duty trucks slowed in December but still contributed to a record year. More than 490,000 orders were placed in an industry known for boom-and-bust cycles.

Frenzied ordering by fleet operators early in 2018 helped smash the former high, set in 2004, by about 100,000 orders, according to ACT Research.

Despite a robust year, December orders of 21,300 fell 43 percent below the same month in 2017.

Investing a Tax Windfall

A strong freight market coupled with a windfall of savings from the 2018 federal tax cut led fleets to order more trucks than they needed to replace older trucks, said Kenny Vieth, ACT president and senior researcher.

“The thinking was ‘I can take this income and pay taxes or buy some assets with significantly better technology,’ ” Vieth told Trucks.com.

Newer in-truck technology includes safety enhancements like automatic emergency brakes, lane-departure warning and adaptive cruise control.

Available fuel-saving technology also is helping big rigs get as much as 9 miles per gallon, compared with around 6 mpg a decade ago.

Additionally, automated manual transmissions jumped in popularity because many younger people entering the trucking industry do not know how to drive a manual. These transmissions now account for 73 percent of new truck transmissions, according to diesel engine manufacturer Cummins Inc.

Building Out the Backlog

Manufacturers are building about 1,400 trucks per day, which equates to 30,000 per month. Orders are projected to slow to about 20,000 trucks per quarter in the first half of the year, allowing the industry to work down the 10-month order backlog, ACT said.

“Order rates right now are not that relevant,” said Don Ake, vice president of commercial vehicles at FTR Transportation Intelligence. “Fleets got a jump on ordering to reserve 2019 build slots, so orders had to fall off at some point, and December was the start of it.”

The number of order cancellations in the first half of the year is a key statistic to watch, Ake said.

As fleets and dealers take delivery of the new trucks, the manufacturing side of the business will align more closely with freight demand, which is expected to grow about 2 percent this year compared with 5 percent in 2018.

“It’s definitely not as vibrant as it was a few months ago, but we still have more freight than we have capacity,” one carrier told Morgan Stanley in a Jan. 3 research note to investors.

Read Next: Freight Growth to Slow After Smashing Records in 2018

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