Class 8 truck orders remained strong in October at 42,500 units after a record 53,700 orders were posted in September. But falling profits at truckloaders could soon reverse orders.
“We view the strength as temporary and reflective of pent-up demand pouring in as more order boards open,” Cowen Machinery and OEM analyst Matt Elkott said in a note to investors. “It might involve a bit of double ordering as some customers are looking for ways to bypass long lead times.”
The typical waiting time for an order to be completed is around nine months. After maintaining orders due to supply chain uncertainty, OEMs fully opened the order books for 2023. Fleets place two orders knowing they will not face cancellation fees unless materials to build the truck have been ordered.
Recovering diesel prices, still-elevated labor costs and lower fleet profits from falling freight rates could mean orders fall to their 10-year average of about 25,000 a month or below, Elkott wrote.
Fleets want to replace older devices
But the aging of the fleet due to supply shortages in production bodes well for replacement demand. On a rolling 12-month basis, Class 8 orders totaled 271,000 units, FTR Transportation Intelligence said.
“We have been limited in terms of capacity over the last three years. So most of the customers I’ve spoken to want more trucks, and they want them faster,” said Harrie Schippers, Paccar Inc.’s president and CFO, on the company’s Oct. 25 conference call with analysts following strong gains in the third quarter.
Paccar, the parent company of Kenworth, Peterbilt and Europa’s DAF Trucks, said order books are full through the first quarter of 2023.
“We’re seeing strong order intake going into the second quarter and into the second half,” Paccar CEO Preston Feight said on the conference call.
Optimism for Class 8 truck orders despite looming freight recession
A mild to moderate freight recession is baked into ACT’s forecast. Still, OEMs should expect a good first half of 2023, said Eric Crawford, ACT’s vice president and senior analyst.
FTR Transportation Intelligence put October orders at 43,200 units, slightly higher than ACT. She is also optimistic in the short term.
“October was the turning point for the Class 8 market,” said Charles Roth, commercial vehicle analyst at FTR. “While we face headwinds in the cargo market, overall fleet sentiment remains upbeat.”
After two strong months, Roth said he wouldn’t be surprised if we saw a “gradual month-on-month decline in net orders” as the year ended.
Truck class 8 Stock low
Even if fleets delay direct orders, retailers who have been missing new vehicles for nearly two years would welcome additional stock.
“As of January 2021, I have not had an unsold storage unit on my property,” said Steve Bassett, president of General Truck Sales with stores in Indianapolis, Muncie, Indiana, and Toledo, Ohio. “I don’t think that will change in the next few years. If I have a latecomer, you must buy what I have, not what you came here for.”
Engine maker Cummins Inc., which supplies powertrains to virtually every manufacturer, is seeing positive order trends as supply constraints ease.
“We continue to monitor the broader economic indicators and what this could mean over time. At the moment, we continue to work to ramp up production rates and are seeing strong underlying demand,” Cummins CEO Jennifer Rumsey told analysts Thursday as the company announced its third-quarter results.
“We expect the market to stay strong into next year because they use the trucks a lot,” she said. “They weren’t able to replace at the level they wanted.”
Class 8 truck orders set a monthly record in September
Class 8 bookings rebound in August as OEMs crack open order books
Don’t be fooled again: truck manufacturers avoid overbooking Class 8 orders
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