So much for the summer doldrums. New truck orders, which typically take a dip in the summer months as both carriers and OEMs reset for the fall, hit a new all-time high in July, according to the latest data from ACT Research.
The firm said preliminary Class 8 net orders came in at 52,400 units in July, besting the previous record of 52,194 in March 2006, which occurred during a big pre-buy of trucks just before the 2007 EPA emissions standards.
“July’s activity was nearly triple (180%) that of July 2017,” said Steve Tam, ACT’s vice president. “The feat is made even more spectacular since July is typically the weakest order intake month of the year. Besides capturing the distinction of the best month in the current rally nominally, on a seasonally adjusted basis orders are also the best on record, outpacing the March 2006 order intake by 13,500 units, or 165,000 on a SAAR basis.”
Similarly, FTR reported 52,250 Class 8 units for July with orders up 25% month-over-month and 187% year-over-year.
Medium-duty orders (Class 5-7) didn’t see the same type of bump, dropping 27% month-over-month tp 19,500 units. Medium-duty orders are still up 18% year-over-year and 22% year-to-date.
The surprising numbers come as OEMs are reporting very little capacity to produce additional vehicles. Mack Truck’s Jonathan Randall, senior vice president of North America sales and marketing, told FreightWaves last month that the OEM is booking Class 8 truck orders for delivery in 2019 at this point.
“We see the market being equally strong next year,” he said. “We have very limited capacity the rest of this year, so …the majority of new orders we are taking now are going into 2019.”
According to FTR, supply of components is also hindering delivery of new trucks.
“The supply chain issues began around March. OEM’s started falling behind in deliveries to fleets in April,” Don Ake, FTR vice president of commercial vehicles, said. “Deliveries did improve a bit in June, but most OEM’s are still operating in catch-up mode. It is uncertain when suppliers will be able to improve delivery times and for OEMs’ to ship all orders on time. Realistically it may take up to a year for everyone to catch up.”
The order numbers for July highlight the possibility that OEMs are trying to line up business into 2019, said a research note put out by Stifel.
“Kenny Vieth of ACT brings up a good point that much of the order strength is believed to be coming from dealers as they expect a strong 2019,” the note said. “And our colleague (Stifel analyst] Dave Ross brings up a good point that Class 8 tractor orders have been the result of carriers expanding their fleets in response to recent wins for dedicated contracts, a service that has received greater demand as shippers seek guaranteed capacity solutions.”
Stifel said that 2019 appears it will be a strong year again for truck orders, which will surpass 300,000 units in 2018.
“For the Class 8 truck OEMs, it is looking even more likely that 2019 will be another year at, near or above 300k units produced, especially considering that production rates in 1Q19 should be higher than they were in 1Q18,” the note stated. “Last fall, as monthly orders in the seasonally strongest months were in the high 30s, we heard plenty of ‘the whole group is a short because orders won’t get any better;’ and they were right as shares have gone down, but what then to say about 52k in July? We expect the market to still be concerned about the cycle peaking – it will just be delayed a year and 2019 rather than 2018 will be the peak.”