Class 8 Orders Slip as Buyers Shift Focus to 2013

This story appears in the Dec. 10 print edition of Transport Topics.

New Class 8 truck orders slipped to 20,200 in November from a nine-month high the previous month, as truck buyers increasingly turned their focus to next year, ACT Research reported.

Last month’s total was 2% below the same month a year ago and 13.8% below October’s order total of 23,431.

Even so, November’s net intake was still the industry’s second-highest monthly total since February.

ACT Vice President Steve Tam attributed November’s month-to-month decline to a “pull forward” in the previous month.

October’s order intake, which was “way beyond expectations,” was bolstered in part by truck buyers placing orders for late-year production to take advantage of 50% tax depreciation before it expires, he said.

By late November, the window of opportunity for carriers to squeeze new orders into 2012 production schedules was starting to close, he added.

Now the new truck market has returned to “unadulterated de-mand,” Tam said. “It’s just people placing their normal orders for their normal delivery schedules in what is likely to be a normal year in 2013.”

Charlie Anderson, sales manager at MHC Kenworth’s Tulsa, Okla., location, said many customers are “just trying to close out the fourth quarter and find out what their taxes are going to do.”

That’s a departure from late 2011, when truck deliveries surged, largely because buyers rushed to take advantage of 100% bonus depreciation that was in place at that time, he said.

“Last November and December, I had basically a frenzy of business with people trying to buy before year-end once they figured their taxes out,” Anderson said. “At the end of the day, if they’re making money, they’re going to try to spend some money rather than pay taxes, and I’m just not seeing it like I did last year.”

On a year-over-year basis, net truck orders declined for the 11th consecutive month.

With one month remaining in 2012, net orders thus far totaled 208,275, compared with 275,293 during the same period a year ago.

David Hames, general manager of marketing and strategy at Daimler Trucks North America, downplayed November’s month-to-month orders decline.

“While several analysts have expressed concern regarding slower November orders, October was the industry’s second strongest month this year, and DTNA’s highest,” Hames said. “In that context, we are very pleased with November performance. December and January are seasonally slower, but as 2011 showed us, even seasonal effects can be hard to predict.”

Göran Nyberg, Volvo Trucks’ president of North American sales and marketing, said replacement demand “remains the driving factor behind new truck orders, which continue to fluctuate greatly from month to month.”

“Longhaul fleets were first to begin addressing their aging trucks as the economy began to recover, but we’re now seeing regional and small carriers focus more on refreshing their equipment,” Nyberg said.

ACT’s Tam said uncertainty is still a factor in the market, particularly regarding the “fiscal cliff,” a series of tax increases and spending cuts that will go into effect at the end of 2012 if Congress does not reach a new budget agreement.

“I think there is still a lot of hand-wringing going on,” Tam said. “First it was the election . . . now we have the same situation, but the catalyst is the fiscal cliff.”

Todd Schaub, dealer principal at S&S Volvo, based in Lima, Ohio, said he’s “guardedly optimistic” about the year ahead, but for now, concerns about the “fiscal cliff” are still giving some carriers a reason to delay purchasing new equipment.

Some customers who are running old trucks know that they can improve fuel economy by replacing them, “but they’re just going to sit back and watch a little bit longer,” he said.

However, the company has experienced “a big increase in demand” in its truck leasing and rental business, Schaub said.

Customers are prepared to rent or lease a truck for one to 18 months, he said, but they’re still hesitant to make a five-year commitment and purchase a new vehicle. “They’re trying to take some of the risk out of it,” he said.

Truck makers’ backlogs grew on a month-over-month basis for the first time since January, according to ACT. At the end of October, manufacturers’ backlogs stood at 69,986 orders, up from 67,111 at the end of September, Tam said.