New Truck Orders Fall in February as Freight Demand Moderates

March 06, 2019 by Alan Adler, @AlanAdler

Heavy-duty truck orders fell for the fourth straight month in February, but manufacturers still have plenty of bookings from last year to build as the industry balances freight demand with the number of trucks available.

Fleets and dealers ordered 16,900 new trucks in February, 58 percent below the same month in 2018, when record orders contributed to the industry’s best year since 2004.

Supply-Demand Regains Balance

“Even though orders are well off their year-ago highs, we believe that current order weakness has more to do with the backlog than with the erosion of the truck-to-freight supply-demand balance,” said Kenny Vieth, president of ACT Research.

The market for Class 8 trucks, which weigh more than 33,000 pounds, is coming into balance after a chaotic 2018, said Don Ake, vice president of commercial vehicles for FTR Transportation Intelligence.

Fearing a capacity shortage would freeze them out of a hot freight market, fleets ordered trucks at a frenetic pace during the first 10 months of 2018, which assured their delivery this year.

Related story: Heavy-Duty Truck Orders Surge 95 Percent in First 10 Months of 2018

“Almost all the orders have already been placed, so now the question is how many will be built and when?” Ake said, adding that orders placed in February likely be built in early 2020.

Daimler Trucks North America, which owns the Freightliner and Western Star brands, said it is sold out for 2019.

Fleets also hedged against the shortage of new trucks by holding onto used trucks longer. That led to marketplace frustration “because selection is limited, and the prices are elevated,” Ake said.

Order Cancellations Rise

Order cancellations from 2018 are beginning to rise as fleets determine how many new trucks they need to handle moderating freight demand. A clearer picture of whether the cancelations are permanent rather than motor carriers shifting delivery timing will become clear by summer, Ake said.

“It jumped up a lot,” Andrej Divis, director of automotive at IHS Markit, told Trucks.com. “They are in the low double digits now. It will be interesting to see if they are going to continue at that level.”

Truck Tonnage Moderates

The American Trucking Associations monitors freight demand through its truck tonnage index, which rose 7.2 percent last year compared with 2017.

“We should expect some moderation this year as most of the key sectors that generate truck freight tonnage are expected to decelerate,” said Bob Costello, ATA chief economist.

Freight demand for most types of trucking cooled in January and February, as it typically does when winter weather settles over most Eastern and Midwest states.

The spot price of freight loads, those ordered on the day they are shipped, fell dramatically and came close to contract rates that shippers sign in advance to lock in their hauling costs, according to DAT Solutions, which tracks freight movement and load pricing.

“It doesn’t seem like the capacity crunch in trucking is still what it was,” Divis said. “Freight is pretty good, but we don’t think it is growing at a rate the industry can’t handle.”

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

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