VolvoLine1 Photo: Sean Kilcarr/American Trucker

ACT: Demand for trailers good, for trucks even better

Firm’s analysis of production backlog indicates demand remains strong for commercial equipment.

Analysis by ACT Research shows that the increased backlog for commercial trailers and trucks remains a strong indicator that freight demand is up and will stay up, though production rates for both are expected to taper off by year’s end.

Trailer backlogs “continued to be positive” in October, noted Frank Maly, ACT’s director of CV transportation analysis and research, with a “stronger than expected improvement” of 6% month-over-month and 8% year-over-year.

“Eight of ten categories were up month-over-month, with liquid tanks and reefers the outliers,” he said. “Eight of ten were also in the black year over year, with medium lowbeds and reefers in the red.”

Maly added that 25,700 trailers were built last month, up less than 1% sequentially, while year-to-date production of 247,500 trailers was also up less than 1% year-over-year. “October [trailer] production, for the most part, was in line with our expectations,” he said. “We expect fourth quarter daily production to be about 5% down from third quarter levels [and] projections indicate that total 2017 trailer production will be about 3% higher than last year, and some increase in factory inventory will result in a slightly smaller year-over-year gain in shipments versus 2016.”

Meanwhile, Kenny Vieth, ACT’s president and senior analyst, said orders for Class 8 vehicles “exploded” in October, rising to a 35-month high of 36,033 units. Those strong orders also boosted backlogs by nearly 11,000 units to 105,200 units for the month of October.

“Coupled with a modestly slower October build rate, the Class 8 backlog-build ratio jumped to 91 days,” he added, though October’s backlog remained low by historical standards, Vieth said.

Production moderated in October from September’s rate, he noted, perhaps due to the decline in the backlog/build ratio. “Looking forward, build plans indicate production will slow into year-end, averaging just 1,114 units per day in the fourth quarter compared to 1,172 units per day in the third quarter,” Vieth pointed out.

As a result, Michael Baudendistel, vice president of the transportation & logistics research group at Stifel Capital Markets, said his company’s 2018 production outlook for 280,000 Class 8 units, which would be 12% higher versus what’s expected for 2017, “remains firm” and that he “continues to believe” there is more risk to the upside than downside in that number

“While we are still many months away from having more clarity on what production will look like in 2019 and 2020, we believe conditions are setting up for a strong end to the decade—as long as freight volume and the broader economy hold up,” he explained in a research note. “Replacement demand … should increase significantly in 2019-2020 as trucks originally [purchased] in 2014 and 2015 will be hitting the end of the typical four- to five-year holding period for new truck buyers. Improved carrier profitability as [higher] contract [freight] rate increases will be felt by fleets later in 2018 [and] as that improved cash flow hits the bottom line, some carriers may be more inclined to increase spending on new trucks.”

TAGS: News Trailers
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish