Class 8 truck orders in July came in ahead of estimates but are still below replacement demand as OEMs continue to reduce backlogs of orders placed earlier.
Typical summer doldrums in new equipment orders will likely remain until OEMs open their 2024 order books. Even then, bookings could be muted as signs appear of a second-half slowdown.
No one is calling for a major downturn. Fleets still have orders pending to catch up with pent-up demand caused by the two-year pandemic and supply chain slowdown. That forced them to keep their trucks in service longer because so few new trucks were available.
July orders came in above expectations at nearly 13,500 units, according to FTR Transportation Intelligence. That was 8% below June but 25% above July 2022. ACT Research pegged preliminary July orders at 16,000, up 45% from a year ago.
Waiting for the fall
“We had expected net orders to fall below 10,000 units monthly several months ago as fleets wait for OEMs to open 2024 build slots, but that did not occur,” FTR Chairman Erik Starks said. “Build slots are anticipated to open soon, so orders likely will not fall much further — if at all — in the near term.”
During a July 25 second-quarter earnings call with analysts, Paccar Inc. CEO Preston Feight said all build slots for Kenworth and Peterbilt trucks are essentially full for the year.
“The markets continue to be healthy for us around the world. We have great conversations going on with our customers around what the trucks are going to be and their order needs are going to be for next year,” Feight said.
He mentioned less-than-truckload and vocational trucks as pockets of strength offsetting moderating over-the-road truck orders.
Supply chain issues still not fully resolved
“We still continue to look at the market as being somewhat constrained in terms of supply base,” he said. “That periodically affects us and everyone else, and so that may [affect] deliveries in Q4.”
Engine manufacturer Cummins Inc. sees a possible slowdown in truck production in Q4.
“This is going to likely be a more gentle cycle across markets than what we’ve typically seen,” CEO and Chair Jennifer Rumsey told analysts Thursday on a conference call. “We do see a little bit [of] softening in the aftermarket.”
“July was essentially in line with, or slightly above, year-to-date trends, according to Kenny Vieth, ACT president and senior analyst.
“In addition to already filled backlogs constraining order flows, 2024 orderboards are not yet, or just barely open, making the opportunity for bigger numbers elusive.”
The jump in July orders could push out some deliveries.
“Build slots for 2023 are already filled, so it is unclear when these orders will be slotted, and the situation clearly will add pressure to increase production through the end of the year,” Starks said.
Related articles:
Class 8 orders quiet again in June as backlogs fall
Rising May Class 8 truck orders less telling than backlog burn
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