Sagging truck orders ‘will probably get worse before it gets better’

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Updated May 5, 2016

dealership_lotLast month was the worst April for Class 8 truck orders since 2009 according to preliminary data released by FTR Wednesday.

North American Class 8 truck net orders fell for the fourth consecutive month in April to 13,500 units, down 16 percent month-over-month and 39 percent year-over-year.

Don Ake, FTR’s vice president of commercial vehicles, says “surprisingly low” orders across the board were weak as the Class 8 market tries to find the bottom of this cycle.

“It looked like the market was going to stabilize …, ” he says. “Fleets have right-sized for the current freight volumes and do not need additional units. They are being very cautious to not over-extend until business improves some. Inventories remain bloated.”

Kenny Vieth, president and senior analyst for ACT Research, says the blame for low orders was widespread.

” … an ongoing overcapacity narrative, a resulting weak freight rate environment, softness in late-model used truck values, and excessive new vehicle stocks,” he adds.

Class 8 orders have annualized to only 190,000 units over the past three months, and activity is expected to remain soft during a traditionally slow summer order season.

For the past twelve month period the annualized rate is 237,000 units.

“The OEMs will not be able to maintain current build rates under these order conditions,” Ake adds. “It appears more production cuts are on the way, consistent with the FTR forecast.”

Backlogs are shrinking and expected to fall below 2014 levels relatively soon, Ake says.

“A big order month could stop the bleeding, but we are entering the summer slump,” he says, “so order activity will probably get worse before it gets better.”