Dec. Class 8 Orders Jump 38%, Capping Best Year Since 2004
This story appears in the Jan. 12 print edition of Transport Topics.
Class 8 truck orders jumped 38% to 43,900 units in December, capping the industry’s second-best year on record, ACT Research reported.
Last month’s preliminary total was the fourth-highest ever and the third straight above the 40,000 mark, ACT said.
The strong December means truck makers received a net total of 380,030 orders in 2014, second only to the 390,165 units recorded in 2004, ACT said.
The full-year tally was up 42% from 267,719 in 2013.
“It’s been a strong year, setting us up nicely for 2015,” ACT Vice President Steve Tam said. “Prospects are very good right now for truckers.”
December’s total also compared with 31,736 orders in the same month a year earlier and rose 7% from the 40,925 orders placed in November.
Tam said the trucking industry continues to experience strong freight demand and tight hauling capacity.
“We’re working very hard with the equipment we have, and it’s just not quite enough,” he said. “We’re going to need some more equipment.”
At the same time, the drop in diesel prices and the congressional approval during December of bonus depreciation write-off for 2014 purchases freed up money for carriers to spend elsewhere, Tam said.
Original equipment manufacturers attributed the elevated demand for new equipment to a strong operating environment for their customers, as well as the improved fuel economy of their latest models.
“We’re anticipating continued growth in Class 8 in 2015 as many customers are seeing improved freight levels and freight rates, and are more willing to invest in new technology,” said Bill Kozek, president of Navistar Inc.’s truck and parts business.
He added that the fuel-efficiency advantages of new trucks “are too great to be ignored.”
“Industry truck orders have risen due to a host of positive economic developments that include high freight demand, a strong [gross domestic product] and manufacturing sector, robust job growth and a reduction in fuel prices,” said Magnus Koeck, vice president of marketing and brand management for Volvo Trucks in North America.
John Walsh, vice president of marketing at Mack Trucks, cited “strong replacement demand for aging vehicles, a robust freight environment and an overall optimistic outlook on the economy.”
“Although strong markets always pressure the supply chain, we fully expect to successfully manage demand and meet customer requirements moving through the year,” he added.
“In 2014, Daimler Trucks North America set records for both company and industry order intake,” said Diane Hames, general manager of marketing and strategy for Daimler Trucks North America.
Other OEMs did not respond to a request for comment by deadline.
ACT’s Tam estimated that the industry’s order backlog grew by about 20,000 units last month to end the year at 171,000.
That backlog represents about half of ACT’s Class 8 production outlook for 2015, which stands at 340,000, a 15% increase from 2014.
If that projection comes to fruition, it would mean that about half of the trucks that will be built during the coming year already have been ordered.
That’s a clear indication that buyers have been ordering new equipment further in advance, Tam said.
Meanwhile, research firm FTR reported 43,620 net orders in December and 375,000 for all of 2014.
“Reports are that more than 75% of the larger fleets have their 2015 orders booked,” FTR Vice President Don Ake said. “With build slots at a premium, fleets have accelerated orders for 2015 requirements to reserve their places for future deliveries. Some of these orders will inevitably be moved out or even canceled, but for now the industry is very bullish on the 2015 truck market.”
Analyst Ann Duignan of J.P. Morgan Securities said the latest monthly order intake suggests that production levels will remain elevated heading into 2015.
“We continue to believe demand will remain above normal for longer this cycle, as evidenced by these orders which are now filling [second-half 2015] production slots,” she said in an investors note.
Rhem Wood of BB&T Capital Markets said December’s strength was “not a total surprise as it tends to be the strongest month of the year,” but he agreed that those orders help to set up another “strong” year in 2015.
Michael Baudendistel of Stifel, Nicolaus & Co. said the elevated order levels continue to be driven by higher carrier profits and their decisions to upgrade to more-efficient vehicles, sometimes replacing trucks getting 6 mpg or less with new ones that can achieve 8 mpg.
“We believe that the falling energy prices have not been enough to discourage fleets from upgrading equipment for enhanced fuel efficiency because the mpg gap between new and old equipment is at a historically high level, and diesel prices have held up far better than crude prices,” he said.
