August Class 8 Orders Tempered by Backlogs

New Class 8 truck orders in August fell 22% from a year earlier and 20% from the previous month, but analysts and truck makers said they remain confident about the overall strength of the market.

ACT Research reported Class 8 orders in August were 19,700 units. That marked the sixth consecutive year-over-year decline. Through August, total Class 8 net orders stood at 199,373, ACT said, down 11% from 224,398 in the same period last year.

“We continue to believe that much of the order decline is a reflection of larger backlogs and tough [comparisons], rather than any substantive change in demand,” ACT President Kenny Vieth said in a statement.

He told Transport Topics he expected a “significant increase” in the rate of orders as the industry moves into the fourth quarter.

“Automotive, construction and housing are doing well, and those sectors generate a lot of freight,” he said.

Original equipment manufacturers have done a good job of “telegraphing the strength that was coming up in the market in 2015, and it allowed people to get a lot of orders placed early,” he added.

At the end of July the backlog-to-build ratio for Class 8 trucks was about 5½  months, Vieth said.

Meanwhile, research firm FTR reported North American Class 8 truck net orders for August at 19,550 units, the lowest level since September 2013, and down 22% year-over-year and 18% from July.

Don Ake, a vice president at FTR, said in a statement, “Historically, August is one of the lowest-ordering months, so if we have bottomed out at 20,000 units, that’s positive. It shows the market is stabilizing at a fairly high rate resulting in a reasonably soft landing as production begins to moderate. We expect orders to remain at this level in September before steadily rising beginning in October.”

Magnus Koeck, vice president of marketing and brand management for Volvo Trucks in North America, said although August’s orders declined, “fundamentals in the overall economy and trucking industry remain strong with continued [gross domestic product] growth, higher fleet profitability and healthy freight levels.”

During a quarterly earnings call for Navistar International Corp. on Sept. 2, Bill Kozek, president of Navistar’s truck and parts business, said that the company’s order intake for new trucks was particularly strong in August and he expects that to continue.

Kozek said the company expects a shift in order composition next year, with medium-duty trucks and buses continuing to grow but Class 8 orders declining modestly from this year’s high levels.

John Walsh, Mack Trucks vice president of marketing, said, “With vacations and the like, it’s not unusual for industry order intake to slow in the summer months. We’re already seeing signs of increased activity as robust freight levels and low fuel prices continue to boost fleet profitability, leading to some fleet expansion and replacement of older equipment with newer, more efficient models.”

During a recent media event, Preston Feight, general manager of Kenworth Truck Co., expressed optimism the truck-buying market will remain strong into 2016 (see story, p. 4).

In an Aug. 25 note to investors, R.W. Baird & Co. analyst David Leiker called the current truck cycle among the strongest on record, citing data going back to the 1960s.

“Orders have sustained a higher and longer recovery than arguably all [of us] have expected,” he wrote.

Also, the steadiness of “demand improvement” is in sharp contrast to past cycles that were subject to “many fits and starts on pre-buy activity” when sales soared to records ahead of the 2007 change in federal emissions standards, Leiker added.

Thomas Albrecht, an analyst with BB&T Capital Markets, said in a report to investors that August’s level of Class 8 orders still was seasonally low but “better than our ‘teens’ expectations.”

He attributed the results to high backlogs rather than an indication of weak demand.

Albrecht also said Class 8 orders should pick up by September and climb to the 30,000-to-35,000 range by October.

Those numbers would be higher than October 2013 but lower than October 2014, according to ACT data.

Associate News Editor Jonathan S. Reiskin contributed to this story.