Strong Class 8 order volumes are helping boost truck manufacturing backlogs, according to data tracked by ACT Research; with backlogs rising by 10,100 units this month to 115,200 units overall.
Kenny Vieth, ACT’s president and senior analyst, added that the overall Class 8 backlog rose an additional 11 days, to 102 days. “On a monthly basis, the backlog is 4.9 months, up 110 basis points since September,” he said.
Veith noted that there’s also been “positive movement” on the inventory front as November marked the first time since January that Class 8 inventories contracted.
“This is the time of year when fewer production days and tax-related year-end buying help alleviate the inventory building that has occurred through the year,” he said. “That process started in November, with Class 8 inventory falling nearly 600 units. Slightly lower inventories and a slightly higher sales rate did little to reduce the inventory/retail sales ratio, which fell by one day, to 2.5 months/53 days.”
Veith also pointed out that rising orders in recent months – especially November – are generating more work for OEMs, with some of them hiring additional workers to keep up with demand.
For example, Mack Trucks recently said it plans to add 400 extra workers to its assembly plant in Lower Macungie Township, PA, starting on January 2; a factory that already employs about 2,000 people. Those additional workers will push the OEM’s total workforce at the Macungie plant to an all-time high, the company said.
The impending passage of major tax reform legislation should also provide a further boost to Class 8 demand, according to analysts.
Michael Baudendistel, vice president of the transportation & logistics research group at Stifel Capital Markets, said in a recent research brief that that the tax bill will likely have an impact on the cash that truckload fleets have available to spend, with their capital spending decisions also possibly impacted by bonus depreciation.
“We believe the North American truck equipment market is poised for a period of strength over the next two-three years, and we do not believe 2018 will be the ‘peak’ year for production,” he added.
“We are forecasting Class 8 production of 305,000 units in 2018 and 315,000 units in 2019,” Baudendistel said. “We believe there is upside potential to both of those numbers – with less downside risk in 2018, especially.”