New Truck Orders Grow; 2014 Slots Nearly Filled

This story appears in the Sept. 15 print edition of Transport Topics.

Persistent strength in new Class 8 truck orders has filled nearly all open build slots in manufacturers’ production plans through the remainder of 2014, industry analysts said.

August’s preliminary order total of 25,400 was down from July’s total of 30,103, a record for that month, but 29.6% ahead of August 2013, ACT Research said.

As a result, ACT estimates that only several thousand units of manufacturing capacity remain for delivery this year, down from about 23,000 open slots at the end of July.

“For all intents and purposes, 2014 is full,” ACT Vice President Steve Tam said.

At the same point last year, the original equipment manufacturers still had about 26,600 open build slots to fill, he said.

“It’s a little bit unusual to see it this full this early,” he added.

The dwindling availability of 2014 production likely put pressure on some buyers to place their orders sooner to manage their fleets’ trade cycles, Tam said.

“It’s a very methodical, contemplative kind of decision, but at the same time, if you’re adamant about when you want to take delivery of that truck and you see a risk that you might not get that date, that will force people to act,” he said.

OEMs have been increasing build rates over the course of the year, but demand has continued to rise.

Through August, the North American truck industry has booked 224,431 new orders this year, up 32.5% from 169,350 in the same timeframe last year. Orders have surpassed the 24,000 mark for nine straight months.

ACT projects that full-year Class 8 production will rise to 297,400 units, which would be up 21.1% from 2013’s build total of 245,496.

Some fleets already have been placing orders for 2015, Tam said, but moving forward, nearly all of the new orders coming in will be for next year.

That will lend strength to the 2015 truck market, he said.

ACT’s projection for 2015 production stands at 311,800 trucks.

“We are well-positioned for continued growth in 2015,” he said.

Tam said the elevated order activity reflects an improving economic environment for carriers.

“The trucking market is doing quite well right now,” he said. “We continue to see capacity being tight. The prospects are just very good for the folks in this space, so they’re looking ahead to next year and what their plans are going to be.”

Some companies are expanding their fleets at a modest pace, further contributing to the growth in new orders, Tam added. “They’re being very cautious as they make these decisions to add to their fleets.”

Industrywide order backlogs stood at 122,700 at the end of July and probably dipped by about 1,000 units in August, Tam said.

Meanwhile, preliminary data from FTR pegged August net orders at 24,947 units, up 29% from a year earlier and the highest total for that month since 2005.

FTR Vice President Don Ake said the August strength appeared to be driven, in part, by dealer incentive programs.

“Regardless, business activity remained healthy in August, and the Class 8 market is still robust coming out of the summer season,” he said.

Year-to-date order intake at Daimler Trucks North America, which sells Freightliner and Western Star trucks, is up 38.1% year-over-year, outpacing the overall industry’s “outstanding” growth, said David Hames, DTNA’s general manager of marketing and strategy.

“We believe that these stronger orders are a sign of optimism from the fleets for the first half of 2015, in addition to the desire to update fleets with the newest technology for fuel efficiency and real cost of operations,” Hames said.

Magnus Koeck, vice president of marketing and brand management at Volvo Trucks, said: “Increasing orders continue to be driven by replacement demand, but some fleets are also beginning to expand as capacity tightens.”

Other truck makers did not provide comment before Transport Topics’ deadline.

Analyst David Leiker of Robert W. Baird & Co. said manufacturers’ rapidly filling order boards played a factor in August’s year-over-year order growth.

“We believe some of the strength this month was to secure remaining build slots for 2014,” he said in a Sept. 4 note.

Ann Duignan of J.P. Morgan Chase & Co. said the August total was “surprisingly strong from a seasonal perspective.”

“We continue to expect replacement activity to be the primary driver of 2014 demand; however, fleet expansion demand is becoming a bigger factor in demand growth,” she said.

Lawrence De Maria, an analyst at William Blair & Co., said summer is typically a slower period for orders, but the industry has not seen the slowdown this year.

“Healthy freight rates have led to improving performance for customers, who are now more willing to replace older vehicles in their fleets and also expand their fleet size,” he said in a Sept. 3 note.