Heavy-Duty Truck Order Cancellations Hit Two-Decade High

Posted on 21. Nov, 2016 by in ACT in the News

Cancellations of heavy-duty truck orders soared to the highest rate in more than 20 years last month, according to ACT Research, adding to the woes of manufacturers that have seen new orders for big rigs plummet this year.

Fleet owners in October canceled orders for 8,610 Class 8 truck tractors, the biggest vehicles that carry much of the country’s supply of retail goods, said Jim Meil, principal at ACT Research. That amounted to 10.5% of the backlog of the heavy-duty trucks that have been ordered but not yet built.

The group said that was the highest rate of canceled orders since September 1995.

The cancellations follow a steep decline since late 2015 in the trucking industry as carriers have pulled back fleet expansion and replacement plans amid lackluster shipping demand and slipping freight rates.

 Backlogs are an expression of confidence in future shipping demand, Mr. Meil said, so the dropped orders suggest there are “more businesses, more customers out there who for one reason or another might have lost that faith. This is a high number by any benchmark.”

He cautioned, however, it is unclear whether the large overall number signals a broad deterioration in the market or that several large orders were canceled in the same month. Larger economic indicators didn’t change course heading into October.

“I don’t see anything different in terms of freight or an economic dynamic,” but trucking manufactures do typically validate their backlogs in October, which may have shown “things were a little bit shakier for some of that intended business than the manufacturers thought back in the summertime.”

Overall orders for heavy-duty trucks fell 46% year-over-year in October, extending a year-long decline in orders that has hit factory operations at companies such as truck maker Navistar International Corp. and engine manufacturer Cummins Inc.

The cancellations “would indeed have some ramifications upstream to the supply chain,” he said.

Heavy-Duty Truck Order Cancellations Hit Two-Decade High