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Class 8 orders drop 10% month-over-month, 35% year-over-year, ACT says
COLUMBUS, Ind. — Class 8 orders dropped 10 percent month-over-month and 35 percent year-over-year in March, trucking analyst firm ACT Research Co. LLC reported April 18, to a total of 16,354 units.
Medium-duty net orders totaled 13,242, down 3 percent from February, but up 10percent for the year.
"Medium and heavy demand trends continue to follow the sectors of the economy that drive their respective cycles," said Kenny Vieth, ACT's president and senior analyst. "For medium-duty vehicles, the consumer economy continues to produce good outcomes as job and income growth support healthy demand for big-ticket durable goods and housing. For Class 8, there are too many trucks chasing insufficient freight. Low prices across the commodity spectrum have rolled back investment, cutting demand for machinery. In addition, the strength of the U.S. dollar has made U.S. manufactured goods less competitive in global markets," Vieth said. He added that the March net order volume for Class 8 was lower than had been seen since late 2012.
Supply of Class 8 trucks has continued to rise faster than demand, he added.
"The capacity index [supply] rose faster than the freight index [demand] for the seventh consecutive month and the twelfth time in the past fourteen months in March," he said. "In addition to ongoing weakness in domestic manufacturing, an inventory overhang continues to exacerbate new freight creation. A return to 'normal' inventory levels in the broader economy is the first step to improved freight market performance. However, to date the correction has been slower than expected in coming," he said.
Conversely, U.S. and Canadian natural gas (NG) Class 8 truck retail sales improved modestly in February, after getting off to a slow start in 2016, according to an April 15 ACT report. ACT attributed this to a high number of natural gas vehicle repeat sales, despite the continuing low cost of diesel prices, which is making the return on investment (ROI) for adopting of natural gas less lucrative for fleets not yet invested in NG-fueled vehicles.
"With the fuel price differential continuing to narrow, the ROI to convert from diesel to natural gas is moving in the wrong direction. Payback periods are lengthening," Vieth said. "This doesn't mean the adoption of NG fuel has stopped or that there are no new developments supporting a future uptick in NG truck orders. Despite a 3 percent month-to-month uptick in February, year-to-date volumes are 14 percent below 2015's level and year-over-year sales are down 25 percent. NG infrastructure continues to be built, albeit at targeted locations, and existing NG equipment users remain committed to its long-term viability and emission benefits." ACT Research sees only modest, single-digit growth for the adoption of natural gas as a transportation fuel in the U.S. the next few years, barring legislative changes, Vieth said.
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