October Truck Orders Spike

This story appears in the Nov. 16 print edition of Transport Topics.

North American Class 8 truck orders shot up sharply in October to about 22,000 vehicles, double the previous month’s total and more than twice the year-ago total, according to data from two research firms.

However, the firms said the orders surge most likely was driven by a new pre-buy, as buyers moved to avoid price increases and new engine technology for 2010 models, rather than a reflection of rising freight volume.

Steve Tam, vice president of ACT Research’s commercial vehicle sector, said, “We love to see an in-crease in order strength, but we don’t think it’s sustainable.” He told Transport Topics, “A lot of fleets have no reason to buy a truck now.”

Eric Starks, president of FTR Associates, said he also believed that the orders mostly were placed by fleets that were buying early.

“All indications are that the October increase is coming from fleets that want to fill up the remaining 2009 production slots for trucks with the older 2007 engine technology,” Starks said.

Truck manufacturers have said that new emissions technology required in 2010 will add $6,000 to $10,000 to each heavy-duty truck.

FTR, Nashville, Ind., said Nov. 3 that its preliminary data showed “Class 8 net orders for all major North American [original equipment manufacturers] totaled 21,792 units in October, reflecting a definite upsurge in order activity.”

“October’s order volume is a 104% increase over September and a 117% year-over-year increase,” FTR said.

It said that from August through October, Class 8 orders were received at an annualized rate of 172,300, “significantly better than early 2009.”

ACT Research Co., Columbus, Ind., issued its own preliminary figures Nov. 3 for October, saying that the estimated orders for new Class 8s totaled about 22,000.

Both companies conduct their research independently and both measured trucks ordered from North American-based manufacturers by buyers in the United States, Canada, Mexico and for export.

Kyle Treadway, chairman of American Truck Dealers, said that dealers have seen an increase in new Class 8 orders.

“Yes, I would agree we are seeing a pre-buy,” Treadway told TT. “I would say 80% [of the new orders] are requiring pre-2010 engines.”

He said the surge was not spread evenly over the country, but declined to say where it has not occurred.

“Also, we are not seeing the over-the-road for-hire fleets doing the pre-buy as much as private, regional and local fleets,” Treadway added.

He said most of the buyers were not trading in their older vehicles.

“Most of them aren’t happy with trade values they’re being offered, and they’re trying to market them themselves,” Treadway said.

Treadway also is president of Kenworth Sales Co., West Valley City, Utah, which has 18 dealerships in six states.

“For our territory, private fleets have been among the most active, most of them medium and large,” he said.

Not all dealers experienced a surge.

“Personally no, we didn’t see it,” George Grask, president of Cedar Rapids Truck Center Inc., an Iowa Peterbilt dealer, told TT.

“We were on a number of deals that we thought were going to come down, but then they just got cold feet in the environment we’re in right now,” Grask added.

FTR’s Starks said that a truck order, while it usually can be cancelled three months before pickup without a penalty, constituted a fairly firm commitment to buy.

“Basically, it has to be a signed contract with financing in place in some form,” Starks told TT.

“It can’t be, ‘Hey, I just want a truck.’ Dealers have to make the same commitment.”

No truck manufacturers responded to requests for comment except for Navistar Inc., which makes International trucks.

“Yes, we saw an increase in orders in October,” spokesman Roy Wiley told TT. “We don’t view it as meaning that much. What happens in 2010 will be the really important test.”

According to ACT Research, orders reached their lowest level since 2006 in February this year, when 6,556 orders were recorded. Orders have been rising moderately the past three months, to 9,162 in July; 10,744 in August; and 11,112 in September, ACT said.

Orders are still far below 2006’s record sales, when 284,008 were sold.

On Nov. 11, ACT Research forecast that medium- and heavy-duty markets wouldn’t see a return to normal replacement rates until 2011.

“ACT predicts quarterly production rates for Class 8 vehicles will grow over 20% on a year-over-year basis in each quarter of 2010, but will not reach replacement level rates until early 2011,” its statement said.

“While the economy emerged from recession in the third quarter, we expect a slow recovery rather than a break-out,” Kenny Vieth, partner and senior analyst with ACT Research, said in the statement.

“When profitability does return to trucking, there will be significant pent-up demand to replace older than normal fleets,” Vieth predicted.