Anecdotal reports of Class 8 truck orders being canceled started gaining currency in October. Now, the statistics are bearing out the stories. Manufacturer-spiked orders for the past two months are the highest in more than a quarter of a century.
“Between this month’s cancellations and the restatement of October’s volume, we have to go all the way back to Q3 1995 to find a month, or two, to rival current cancellation volumes,” said Kenny Vieth, president and senior analyst at ACT Research.
The order cancellations have nothing to do with demand. Fleets are desperate for new equipment to keep up with a freight market where spot rates are still at record levels. And the orders, while technically flushed, are actually being retimed as 2023 models instead of 2022.
“Usually, OEMs build most of the trucks they think they will build. They couldn’t this year.”
kenny vieth, president and senior analyst, act research
It is an acknowledgement that manufacturers really don’t know when a persistent shortage of semiconductors and a raft of other components will be resolved.
Early sign: Western Star 5700XE
FreightWaves reported in October that Daimler Trucks North America dealers were canceling orders of Western Star 5700XE models, a truck based on the Freightliner Cascadia and assembled on the same line in North Carolina. DTNA never acknowledged the dropped orders, saying only that the 5700 would no longer be produced after 2021.
Watch now: Rebounding trailer orders in November likely a blip
Class 8 cancellations, running at about 5.7% a month since April 2020, during the first wave of coronavirus, jumped to 18,874, or 42%, in November, the second-highest on record. Restated figures for October showed a 66% cancellation rate, or 16,938 units.
The highest month for canceled orders — 19,100 — was September 1995. The big difference from then to now: It was customers, not manufacturers, doing the canceling. Typically, a customer can renege on an order without penalty until about three months before production when the OEM is ordering materials.
Lower production estimates
The combination of COVID and parts shortages created because of it has made a shambles of truck production. Six months ago, ACT projected 308,000 trucks would be produced this year. That number is now 256,000. The company has cut 60,000 units from its 2022 estimate to 300,000 units.
“Usually, OEMs build most of the trucks they think they will build,” Vieth told FreightWaves. “They couldn’t this year.
“This massive spike in cancellations was driven not by customers saying, ‘I don’t need that truck,’ but rather by the OEMs who have been unable to build and deliver backlogged orders in a timely fashion.”
The backlog of Class 8 orders was 267,600 at the end of November. The cancellation rate was 7.1% of the backlog, Vieth said. By comparison, the average cancellation rate of the backlog for the five years from 2015 to 2019 was 2.1%
Related articles:
Exclusive: Daimler drops Western Star 5700XE model, some current orders canceled
Inability to produce pushes Class 8 orders to lowest November in 26 years
Record-setting used truck prices no deterrent to spot rate-chasing buyers
Charles
⚠️ Market crash is coming in 2022 when this huge bubble pops from Bidens aggressive attacks on business and the economy with Taxes and Regulation overload , along with dramatic energy price increases and the 80,000 IRS gestappo agents coming to bleed the USA public dry of their hard earned money 🔥🤑🔥🤬🔥🤡🔥