Heavy-Duty Truck Orders Down in January as Makers Tackle Backlog

February 06, 2019 by Alan Adler, @AlanAdler

Heavy-duty truck orders dropped to the lowest level in 18 months in January as manufacturers worked to assemble a record number of trucks ordered in 2018.

January orders of 15,800 Class 8 trucks fell 68 percent compared with the same month a year earlier, which marked the start of an ordering surge that continued through the fall, according to ACT Research.

“We view January’s order softness as having more to do with pulled-forward orders and a very large Class 8 backlog than with the current supply-demand balance,” said Kenny Vieth, ACT president and senior analyst.

Early orders

A combination of savings from federal tax cuts and a flourishing economy led fleets and dealers to place orders sooner than normal to assure earlier build slots.

But by November, orders for big trucks had begun to slide.

“We believe orders will remain low for the next few months,” Kristine Kubacki, trucking analyst with Mizuho Industrials, said in a research note. “But conditions are still fairly favorable for everybody.”

Despite production increases late in 2018, a truck ordered now might not be ready for delivery until the first quarter of 2020, she said. Mizuho, which surveys truck dealers, showed tight inventories of new and used trucks, which has driven used-truck prices higher.

“It is surprisingly strong on the used side,” Kubacki told Trucks.com. “We may see conditions start to soften later this year as that supply starts to build up.”

For now, however, more trucks are needed to offset the effects of electronic logging devices and eCommerce.

Digital monitoring of a driver’s adherence to federal hours-of-service rules that limit driving to 11 hours in a 14-hour period has caused some one-day trips to take two.

Consumer demand

Consumer demand for speedy delivery on online purchases also has prompted fleets to add trucks and trailers to address a move to shorter and more frequent hauls.

Meanwhile, U.S. economic growth is slowing over concerns about cooling economies in China and Europe, uncertainty over U.S. tariffs on Chinese imports and political brinksmanship that led to the longest partial shutdown of the federal government in history.

What that means for freight demand is uncertain. FTR Transportation Intelligence predicts a 2 percent increase in freight demand this year compared with 4 percent in 2018.

Freight volumes remained strong, but prices per spot load dropped in January after double-digit increases last year, said Mark Montague, senior pricing analyst for DAT Solutions, which tracks how much shippers pay per load.

Truck tonnage increased 6.6 percent in 2018, the biggest annual increase in two decades, according to the American Trucking Associations.

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