Class 8 Orders Surge in Oct. to Highest in Almost 2 Years

This story appears in the Nov. 11 print edition of Transport Topics.

New Class 8 orders jumped to the highest level in nearly two years in October as they rose 13% above the same month in 2012, ACT Research reported.

Last month’s total of 26,300 was the largest since December 2011 and marked the ninth consecutive month of year-over-year growth in North American heavy-duty orders, ACT said.

Last month’s order intake also jumped 38.3% from September’s revised tally of 19,018.

Order activity typically rises in the fourth quarter, but a variety of analysts said October’s total still exceeded expectations.

“It’s a planning quarter, and it’s starting off on the right foot,” said Ken Vieth, founder and general manager at ACT.

This is the time of year when many fleets plan their equipment-replacement cycles and talk with their shippers about their needs for the year ahead, he said.

The growth is “a good sign” that shippers must be saying they need trucking services, Vieth said.

Cumulative 2013 orders stand at 214,668, up 14.3% compared with the first 10 months of 2012, according to ACT.

Another research firm, FTR Associates, reported that net orders climbed to 25,960, up 14% year-over-year and 39% higher than September.

“The increase in orders is broad-based and not isolated to any one OEM,” said FTR Vice President Don Ake. “The number is at the high end of our expectations and will likely help to solidify build activity in the short term.”

“The industry continues to be cautiously optimistic, and we are mainly seeing replacement demand,” said Bill Kozek, president of Navistar International Corp.’s North American truck and parts business. “However, October was a strong month for heavy-duty orders, and some of that is part of the expected fall surge.”

Daimler Trucks North America “views current economic factors as supporting a healthy truck industry,” said David Hames, the company’s general manager of marketing and strategy. “However, fleet age continues to grow as many customers delay new vehicle purchases.”

“Replacement remains a primary driver of Class 8 demand,” John Walsh, vice president of marketing at Mack, told Transport Topics. “It’s too soon to say whether the recent changes in hours of service will result in additional sales. But we’d certainly like to see the uptick in orders continue.”

Magnus Koeck, Volvo Trucks’ vice president of marketing and brand management, also stressed replacement demand.

“The Class 8 market is traditionally fairly strong during the fourth quarter, and we anticipate replacement demand will continue as the primary driver behind new truck sales,” Koeck told TT.

Calls to Paccar Inc. were not returned by press time.

ACT’s Vieth said the old age of much of the equipment on the road is helping to drive order placement, especially considering the better fuel economy offered by new tractors.

Modern trucks with improved aerodynamics and fine-tuned engines can get perhaps an extra 2 mpg compared with equipment from 2006 or 2005, he said.

“That’s going to pay for equipment cost increases very rapidly,” he said.

David Leiker, an analyst at Robert W. Baird & Co., said October’s order intake was above expectations and likely led to backlog growth during the month.

“This month’s strength was consistent with seasonal order trends and above our expectations, but given recent supplier caution around fourth-quarter build plans, it does not appear OEMs are yet revising build schedules to reflect one month of better order activity,” he said in a Nov. 6 report.