A throttling down of trailer production is coming. FTR CEO Jonathan Starks says the only question is when will it occur?
During his economic keynote presentation Thursday at the National Trailer Dealers Association (NTDA) Convention in Marco Island, Fla., Starks revealed FTR’s most recent trailer forecast for the remainder of 2023 with projections out to 2027. After three years of steady production growth since the downswing of the pandemic Starks says economic softening coupled with lower utilization rates for trucks and trailers will bring production in line with replacement demand in 2024.
That’s a substantial contraction year over year — “down roughly 25% from where we’ve peaked out at,” he says — but still well above 2020 and nearly equivalent to the total number of trailers produced in 2008, 2009 and 2010 combined. Starks says it’s a downswing FTR believes “the market has the capability to manage,” and if the economy gains steam in the latter half of 2024 like many economists and FTR are anticipating, trailer demand and production should rise with it.
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As for when OEMs begin to dial down their production, Starks says there are two schools of thought. September trailer order totals will be available later this month and are expected to be the highest order total of the year. Class 8 truck orders doubled from August to September and surpassed 30,000 units for the first time this year. Starks says FTR doesn’t anticipate trailer orders to jump quite that high, but says greater than 20,000 orders could be possible, with a slight reduction each month through the end of the year.
He says if order totals for September and October are robust, manufacturers may choose to remain at elevated production rates for the rest of the year and pull back their output in 2024 when demand weakens. But if orders come in below expectations, that throttling back could begin in this quarter as a means of smoothing out the reduction in units across 2023 and 2024.
FTR is currently forecasting trailer production at 322,000 units in 2023 and 242,000 units in 2024, with the weakest future production period being the third quarter next year.
Fortunately, he says that’s also when FTR and many economists believe the economy will pick back up. Many economic metrics FTR tracks are currently stalled in what Starks calls a “1% growth recession.” Business isn’t faltering but it lacks the resources necessary for significant growth. Starks says in these moments, recessions can be hard to avoid for some market segments.
In transportation, Starks says FTR believes equipment utilization is at or near trough levels and will begin returning to historical norms (around 92%) in 2024 as industrial production, inventory levels and GDP goods transport sector metrics rise. Spot and contract rates also are expected to normalize and begin rising next year. Once business picks up, FTR is forecasting steady growth for trailer production through 2027.
On a segment basis, Starks says an escalation in flatbed cancelations over the last quarter makes it the weakest segment at the moment but FTR believes flatbed production will still increase with dry vans and reefers after the market corrects next year. The company is forecasting positive year over year increases in production for all three segments in 2025 to 2027.
