Truck Builders, Motor Carriers Spooked by Tariffs, Slowing Economy

July 11, 2019 by Jerry Hirsch, @Jerryhirsch

Orders for new heavy-duty trucks plunged 66 percent during the first half of this year compared with the first half of last year, according to freight-equipment research group FTR Transportation Intelligence.

It is the weakest 6-month start to a year since 2010, said Don Ake, FTR vice president of commercial vehicles.

Part of the decline is a result of record orders for trucks in the heaviest Class 8 weight segment in the U.S. and Canada last year. Motor carriers have the trucks they need in the pipeline and aren’t rushing to purchase more, said Kenny Vieth, president and senior analyst at ACT Research.

But economic uncertainty also is starting to weigh on the trucking industry, for both vehicle manufacturers and motor carriers.

The big truck makers are reluctant to quote prices for new orders because they aren’t sure what their material costs will be. Trump administration tariffs and the potential for higher tariffs and trade disputes have spooked the industry.

“Until the tariff situation is resolved, it is risky to quote prices for 2020. Fleets are also reluctant to accept material surcharges with this much ambiguity present,” Ake said.

“The economy and freight are still growing, but the latest manufacturing data is not promising,” he said.

While consumers are still purchasing goods, FTR expects freight growth to moderate the rest of the year.

“As a result, Class 8 truck build rates should begin to decrease in the coming months,” Ake said.

Still, don’t expect the industry to crater. Production and retail sales remain robust, Ake said.

FTR estimates heavy-duty truck production will hit around 350,000 units this year.

But that will slide about 21 percent to 275,000 trucks next year as the economy and freight demand slows.

Others have a more pessimistic outlook. ACT Research estimates manufacturers will build 342,000 trucks this year. That will fall by more than 100,000 to 240,000 next year.

The decline in spot freight rates is now 12-months old, Vieth said. Rates for dry vans – traditional truck trailers – fell 20 percent last month compared to June 2018. Contracts rates also are declining.

“We are clearly in a freight recession.” Vieth said.

Alan Adler May 15, 2019
The trucking industry already was softening before the latest round of tariff increases in the U.S.-China trade war brought new challenges.

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