February Class 8 orders extend surging demand for new trucks

Missing parts like wiring harnesses, foundry parts, axles or tires can be added after a truck is assembled. A lack of microchips may prevent the initial assembly itself. It certainly prevents increasing production, Vieth said.

“The truck now needs five or six chips that are required for running the entire vehicle, which used to be 10 years ago, probably one or two that used to be there,” Srikanth Padmanabhan, president of the engineering business unit at Cummins Inc. (NYSE: CMI), told a Raymond James institutional investor conference on Monday. 

Record freight rates driving demand

Consumer goods spending continues to drive demand for new trucks. The manufacturing  economy, led by a red-hot housing market, also is recovering as the pandemic eases.

Contract freight rates are at record levels, as are spot rates, after seasonal adjustment, he said. That is bringing “swing capacity” trucks onto the scene to take advantage of high rates.

But it does not address a fundamental shortage of drivers. 

”Rising driver pay for several months has yet to impact the tight driver market,” said Tim DeNoyer, ACT vice president and senior analyst. “The surge in pandemic cases, which is now reversing, and extended unemployment benefits, which are set to be extended further, are also supply constraints.”

Most truck driving schools have been closed during the pandemic. The few graduates entering the profession do not know how to drive a manual transmission. That is forcing fleets to buy new models or late-model used trucks with automated manual transmissions (AMTs). The number of current drivers failing drug tests continues to create openings.

Long waits getting longer

The order backlog at the end of January for an on-highway sleeper cab was 11 months, Vieth said. The wait likely grew in February for on-highway models. Build slots remain this year for vocational trucks, he said.

“It depends on the truck and depends on the OEM,” Vieth said. “What’s going through their mind right now is, ‘I wish I had ordered a truck three months ago.’ They might even be talking to second- and third-favorite OEMs, or starting to look at used trucks.”

Class 8 orders for the previous twelve months total 338,000 units., FTR said.

“[Manufacturers] are under intense pressure to deliver as many vehicles as they can, as soon as they can,” said Don Ake, FTR vice president of commercial vehicles. “In response, fleets continue to place orders in elevated volumes to try to acquire as many tractors as possible.”

Related articles:

Robust January Class 8 orders come with a warning

December Class 8 orders rank fourth highest in history

2018 redux: Truck buying binge borrowing from future business

Click for more FreightWaves articles by Alan Adler