Replacement demand likely to drive truck orders despite economic headwinds

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Updated Sep 22, 2022

Depending on which definition for recession you use, the U.S. is either in one or appears to be heading into one, with slow growth expected into next year.

According to Eric Crawford, ACT Research’s Vice President, Senior Analyst, supply-chain disruptions continue to moderate, and he expects a modest 2023 recession centered on the first quarter next year, "with a more material freight downturn having already started in Q2’22 and beginning to contract year-over-year in Q4’22.”

While freight rates and volumes are indeed measurably off their pandemic highs, that's not dampened an "unprecedented level of demand for commercial trucks," said Jonathan Randall, Mack Trucks senior vice president. "No one is calling to cancel trucks. The call is, "I'm going to take 75 [trucks], and please can you get me another 50. I need them desperately." 

Randall spoke to journalists as part Mack Trucks drive event in Bethlehem, Pennsylvania, Wednesday. 

North American Class 8 truck orders are expected to close the year around 300,000 units, and Randall said he expects a stronger year next year, even amid widespread economic uncertainty, driven mostly by fleets seeking to renew their fleet. 

"A commercial truck pullback will not be a 1:1 relationship [with a broader scope pullback of the U.S. economy]," he said, noting strong replacement demand for trucks would continue to bring fleets to the dealership.

Supply chain snarls dating back to last year have prompted fleets to revamp their trade cycle. Registration data shows the average age of a Class 8 truck at 4.4 years, a level that's remained consistent since about mid-2022. Previously, it had been around 4 years or newer.

The Federal Reserve on Wednesday ratcheted interest rates a third consecutive 75 basis points, a move that was widely expected. Regarding August truck order activity, Crawford noted it "remained at modest levels in August, if above recent activity levels, as the OEMs slowly begin to open their 2023 order books," adding the May to July period is generally the weakest period of the year for new order activity and "for Class 8, weakness typically extends through September.”

Jason Cannon has written about trucking and transportation for more than a decade and serves as Chief Editor of Commercial Carrier Journal. A Class A CDL holder, Jason is a graduate of the Porsche Sport Driving School, an honorary Duckmaster at The Peabody in Memphis, Tennessee, and a purple belt in Brazilian jiu jitsu. Reach him at [email protected]