March Truck Orders Soar 24.4%

By Seth Clevenger, Staff Reporter

This story appears in the April 14 print edition of Transport Topics.

New Class 8 truck orders climbed 24.4% in March from the same period a year ago, ACT Research Co. reported, and manufacturers are taking additional steps to ramp up production.

The preliminary net order total of 27,400 units last month far exceeded the 22,033 placed in March 2013 and continued the surge in demand that began late last year, ACT said.

During the first quarter, North American truck makers recorded 91,123 new orders, up 35.2% from the 67,376 booked in the first three months of 2013.

That growth has spurred manufacturers to boost their build plans.

Mack Trucks, for example, confirmed last week that it plans to add about 100 jobs at its assembly plant in Macungie, Pa., during the next few months to meet rising customer demand.

That move follows a similar announcement by its sister company, Volvo Trucks, which recently said it would hire 200 more workers at its Dublin, Va., plant by the end of June.

Meanwhile, Daimler Trucks North America already is building about 100 more trucks per day than it was during the fourth quarter, CEO Martin Daum said late last month at the Mid-America Trucking Show in Louisville, Ky.

ACT Vice President Steve Tam said a combination of freight growth and tight capacity has “flipped a switch” in truckers’ minds regarding their equipment needs.

“I think, finally, we’ve had a long enough run of good news about the economy and about trucking in particular that they’re starting to get their heads turned around,” Tam said. “Instead of looking behind them, they’re looking ahead now.”

Manufacturers have seen solid year-over-year gains in order activity for four straight months, with a 50.5% jump to 31,697 in December, a 50.8% surge to 34,558 in January and a 30% increase to 29,165 in February.

Against that kind of recent strength, the March tally actually proved to be the industry’s lowest total since November — while at the same time the sixth-best monthly total since early 2006, ACT said.

Another research firm, FTR Associates, said its preliminary data showed Class 8 orders at 27,139 last month.

“This is a great order total for the month of March,” FTR Vice President Don Ake said. “The market is maintaining strength and confirms we are in a solid growth cycle.”

FTR boosted its full-year forecast for North American shipments of Class 8 trucks to 286,000, from 268,000 after the March order intake.

“The trucking industry is witnessing growth driven by smaller to medium-size fleets, including the rental market, which indicates a shift toward conditions that are indicative of the start of a growth market,” said David Hames, general manager of marketing and strategy at DTNA.

“We continue to see strong order intake and, during the past five months, this has driven a positive industry outlook on sales,” said Bill Kozek, president of Navistar Inc.’s North American truck and parts business. “This is very encouraging for the total industry in 2014.”

Other manufacturers declined to comment or did not respond before Transport Topics’ deadline.

ACT’s Tam said the elevated order numbers in December and January were easy to ascribe to large fleets placing big orders, but the continued order surge into March points to broader strength across the industry, including small and medium-size carriers.

Recent order intake, combined with rising backlogs, “point to likely increases in industry build rates and company forecasts,” analyst Stephen Volkmann said in a note to clients of Jefferies & Co.

Lawrence De Maria, an analyst at William Blair & Co., said production rates could move higher, given the continued strength in orders and rising backlogs.

“After several years of disappointing truck demand versus expectations, an inflection point may be occurring,” he said. “The underlying fundamentals remain positive: fleet age, scarce used trucks and better fuel economy.”

David Leiker, an analyst for Robert W. Baird & Co., said a “surge” in industry backlog since the fall has begun putting upward pressure on build rates.

For-hire truckload carriers appear to be at a “tipping point” with past productivity gains “now being challenged by regulatory burdens,” Leiker said, specifically referencing hours-of-service requirements and the federal Compliance, Safety, Accountability program. If gross domestic product grows faster than productivity, fleets will need to invest in equipment, he said.

Manufacturers’ backlogs stood at 114,100 units at the end of February and probably added 4,000 to 5,000 units in March, ACT’s Tam said.

He predicted “a continued ratcheting up of build plans” in light of the backlog expansion.

ACT’s full-year forecast for North American Class 8 production stands at 284,600, which would be a 15.9% gain from the “disappointing” total of 245,496 in 2013.