ACT President and Senior Analyst Kenny Vieth says January’s performance was not wholly unexpected with near-record backlogs in both the medium and heavy-duty vehicle markets.
Don Ake, FTR vice president of commercial vehicles, says backlogs are expected to fall, but should remain more than 70 percent higher than a year ago
“Orders had to fall below 20,000 units at some point. There were record breaking orders placed last July and August, and this is the payback for that volume,” Ake says. “Even with the weak January numbers, over 330,000 trucks have been ordered in the last nine months, so demand for trucks in 2019 remains strong. ”
Regarding Class 8, Vieth notes that January 2018 marked the point “at which orders went vertical. We view this January’s order softness as having more to do with pulled-forward orders and a very large Class 8 backlog than with the current supply-demand balance,” he says. “Softening freight growth and strong Class 8 capacity additions suggest that the supply-demand balance will become a story in 2019, but January seems a premature start to that tale.”
Ake characterized January’s dip as “more of a resting point than a turning point, citing the amount of orders in the backlog.
“The key will be how many of these trucks get built and when. The fundamentals of the economy and freight growth remain solid, so there is no reason to panic,” he says. “The production rates the first few months of the year will be a better indicator of Class 8 demand than current orders are. We do expect the cancellation rate to remain elevated, as fleets move their orders around in the backlog. Order rates are expected to remain suppressed for a few months, but build rates and retail sales are forecast to climb. “