Class 8 truck orders dropped significantly in May, obscuring strong underlying demand that cannot be met because of an already huge production backlog and supply chain constraints frustrating attempts to build more.
“We’re talking about the worst supply chain environment since the end of World War II,” Don Ake, FTR Transportation Intelligence vice president of commercial vehicles, said during a webinar Thursday. “We never expected it to get this bad. We have over 25 components experiencing late deliveries or partial deliveries. And that number could be as high as 40.”
Preliminary Class 8 orders of 23,600 for the month were down 32% from April, FTR reported. ACT Research pegged bookings at 22,900, a 32% decline from April. Due to the industry being practically shut down in May 2020 because of the pandemic, orders were a whopping 168% higher year over year, ACT said.
FTR’s rolling 12-month total of combined orders reached 420,000.
“Most fleets have ordered all the trucks they need for 2021,” Ake said. “They are getting frustrated because production is unable to keep up with demand. Carriers need more trucks on the road now, but semiconductors and other component shortages continue to restrict production.”
Manufacturers are holding off opening order books for 2022 because they cannot project whether already inflated prices for commodities like steel, aluminum, wood and rubber will continue to rise. Trucks currently in production queues could cost more than customers agreed to pay, setting the stage for negotiations over who pays the additional costs.
“While fleets and dealers would like to place orders to establish their places in the 2022 production queue, the [manufacturers] have not yet opened their order books for next year, Kenny Vieth, ACT president and senior analyst, told FreightWaves. “If recent history is a guide, we would expect those order books to start opening in Q3.”
Neither FTR nor ACT was surprised at the order retrenchment in May.
“There is tremendous pent-up demand being generated in this market. Freight is growing at a brisk pace, but the supply chain bottlenecks slow the flow of new trucks coming off the production line,” Ake said. “This, in turn, is keeping the spot market overheated.”
Said Vieth: “The order pullback aligns with expectations, driven by the supply of open build slots in 2021 rather than demand for equipment.”
All of this suggests a longer cycle for new truck orders, peaking either in 2022 or as late as 2023, Ake said during the webinar.
“The fleets can’t get the trucks that they need this year,” he said. “They’re going to be afraid of shortages next year. So, we’re anticipating that once they open those order boards up, you’re going to see some very impressive order totals.”
Market sales leader Daimler Trucks North America (DTNA) said the robust market reflects a strengthening economy.
“All the key indicators are there that we’re in a very strong market and that should continue,” DTNA President and CEO John O’Leary told FreightWaves. “How long, nobody knows. But one thing about this industry: You know when you’re in a boom and you know when you’re in a bust.”