Truck Orders Drop 21.2%; Decline Is First in 13 Months

Class 8 truck orders in North America dropped 21.2% in November, the first year-over-year decline in 13 months, as the industry recovered from the bruising recession, according to ACT Research Co.

Some industry experts said the looming Jan. 1 expiration of a federal tax break for equipment purchases may have played a key role in the decline.

Manufacturers reported they received 20,700 orders for new heavy-duty vehicles in November, down from 26,268 placed in November 2010, ACT said Dec. 5.

ACT, based in Columbus, Ind., said the new total, which represented a 26.1% drop from October orders of 28,026 units, was a surprise.

“We believe there was a pull-forward of demand from October, when we think some truckers placed orders to beat anticipated price increases for the new model year,” said Steve Tam, ACT’s vice president for the commercial vehicle sector.

“We think the underlying fundamentals of the commercial vehicle manufacturing industry and the trucking carrier industry remain solid,” he added.

“Many truck manufacturers have lengthy backlogs with deliveries out to next year,” said Richard Witcher, vice chairman of the American Truck Dealers association. “Orders in November and December are not likely [to be] delivered in the current year, and therefore, the purchaser cannot take advantage of the 100% bonus depreciation.”

Under the current special federal exemption that expires Jan. 1, buyers of certain new equipment could write off the entire purchase price this year, rather than spreading it over three years, Tam said.

“I am not too worried about the slowdown,” said Witcher, who is also CEO of Minuteman Trucks Inc., an International truck dealer in Walpole, Mass.

Chris Visser, senior analyst of the American Truck Dealers/National Automobile Dealers Association Official Commercial Truck Guide, told TT that the “bonus” depreciation would drop to 50% in 2012 from 100% this year.

Frank Ellett, CEO of Virginia Truck Center, Roanoke, Va., a Freightliner dealer that also sells Mack trucks, said that both of his manufacturers were booked through the end of the year, with one sold out through the first quarter.

“I think this is the situation at all the manufacturers,” Ellett added.

“At least part of the drop, and perhaps the majority, may be due to the deadlines associated with the bonus depreciation program,” Tam said, adding that he had no proof. “It is not likely that the depreciation scenario is solely responsible for the drop.”

Robert Pitcher, vice president for state laws at American Trucking Associations, also urged caution.

“The full write-off currently in effect is important mostly for cash flow,” Pitcher told TT. People “should probably be a little careful about attributing all the truck orders to the write-off, though. It may have contributed to the buying, but who knows how much?”

David Hames, general manager of marketing and strategy for Daimler Trucks North America, said the company was confident that the one-month dip did not signal a downturn in trucking.

“We don’t believe this to be a fundamental shift in the market, but rather a matter of timing,” he said.

Daimler builds Freightliner and Western Star trucks, as well as Detroit Diesel engines.

Other truck makers did not respond to requests for comment.

Truck makers have received 210,830 net new orders through November this year, a 54.6% jump from the 136,346 orders in the first 11 months of last year, ACT said.

Tam said the November decline was not expected to affect ACT’s projection for 2012 U.S. production of 220,000, which would be 23.2% more than the firm’s forecast of 178,500 for 2011.

“Since the estimated U.S. replacement rate is about 190,000 new Class 8s per year, 2012 would be the first year above that level since 2006,” Tam said.

U.S. customers bought 17,424 new Class 8s in October, double the total for the previous October, according to WardsAuto.com (11-21, p. 1).

Tam said that, because of the timing of decisions involved in sales and orders, it was difficult to compare the two figures.

“October sales reflect decisions made over the past year, though most are delivered four to six months after ordering,” Tam explained. “Similarly, orders placed in November will be sold over the next 12 months.”

Virginia Truck Center’s Ellett agreed.

“We are making deliveries, but they were ordered three, four or five months ago,” he said.

In the same way, people who could have wanted to order in November could have been put off by the long delay in getting a new truck, missing the incentives program, or by unease over the economy, Tam said.

“Frankly, I think everyone wants to see what will happen to the economy in the first quarter,” Ellett said.

Tam also said that customers who put off placing orders in November could place them in December or January for the same delivery date as they could have gotten in November.

The previous year-over-year decline occurred in October 2010 at 18,981, down 12% from the 21,579 orders placed in October, 2009, ACT said.