Class 8 truck orders in November were the lowest for that month in 26 years, reflecting a huge backlog of unbuilt trucks rather than a demand issue.
The backlog of bookings in queue at major OEMs exceeded 14 months, according to ACT Research. That means that with few exceptions, an order for a Class 8 power unit placed this month would be delivered in February 2023.
“Long backlog lead times resulting from ongoing supply constraints continue to pressure new order activity,” said Kenny Vieth, ACT president and senior analyst.
“With backlogs stretching into late 2022 and still no clear visibility about the easing of the ‘everything’ shortage, modest November order results suggest the OEMs are continuing to take a more cautious approach to booking orders so as not to extend the cycle of customer expectations management.”
ACT reported preliminary Class 8 orders of 9,800 in November. FTR Transportation Intelligence said its preliminary estimate was 9,500. Both analytics firms will report actual numbers for November around the middle of December.
Production estimates falling
FTR said orders were down 41% from October and 82% year over year. Supply chain uncertainty is the biggest reason for the lull. On a rolling 12-month basis, Class 8 orders total 393,000, more than the industry has capacity to build. ACT’s latest production estimate for 2021 is 260,000, a number that has been adjusted downward several times.
A shortage of semiconductors used in everything from power windows to safety systems has prompted truck makers to build and park new trucks for which they have orders but are unable to complete.
And the paucity of new trucks has driven prices of late model used trucks skyward, when they are even available. Canada-based auction house Ritchie Brothers reported that a 2020 Kenworth W990 sleeper cab sold for $166,110 in an auction in Alberta, Canada last week.
“The low order numbers in November in no way are representative of total demand,” said Don Ake, FTR vice president of commercial vehicles. “The weak volumes are because OEMs are managing their backlogs very carefully.“
In addition to inflated equipment prices, spot rates for freight are at record levels and contract rates are rising. When the manufacturing sector of the economy gets past the supply chain crisis, freight volumes will increase, Ake said.
Payback for overbooking
ACT’s October data, the last full month available, showed a Class 8 backlog of about 281,000 units. Based on the build rate during the month, the backlog-to-build ratio was 14.6 months because of supply challenges, Vieth said.
Component deliveries, especially semiconductors, have been unreliable since March, Ake said. OEMs booked a huge number of orders a year ago, expecting to be able to build at full capacity throughout 2021, which has proved unachievable.
“After overbooking almost every month in 2021, the OEMs are being extremely meticulous about scheduling commitments in 2022,” Ake said. “Once the OEMs are confident they can obtain the necessary production inputs, they will boost production and enter more orders.”