As published in the latest release of the North America commercial vehicle forecast, expectations for Class 8 and trailers remain relatively the same in November, though forecasts for dry van trailers are pulled back due to a recalibration of our expectations regarding power-only brokerage.
“To accomplish the scheme of introducing drop-and-hook productivity into the small carrier spot market was a plan by large fleets and brokerages to boost trailer-to-tractor ratios, build trailer pools, etc., into the wildly growing pandemic stimulus and supply-chain constrained spot market,” according to Kenny Vieth, ACT’s President and Senior Analyst. “From Q1’21 to Q2’22, DAT’s spot market postings averaged nearly 4.9 million loads per day. Year to date, DAT’s spot posts have averaged less than 1.4 million loads per day, a 71% decline from the heady average experienced at the peak of the pandemic freight bubble.”
The sharp rise and fall in spot market activity reflects a lot of freight getting to where it was originally intended to go, but couldn’t due to capacity limitations in private fleets and other dedicated operations. Pulling back on this heretofore anticipated ratio expansion lowers the trajectory of the dry van market.
Vieth concluded, “One of the things staying our hand from deeper forecast cuts, in the face of weak freight fundamentals, has been a solid industry-wide start to ‘order season.’ The last trimester of the year is the period in which the OEMs usually open their out-year order books, leading to a period of outsized orders that typically extends into March.”
ACT Research believes that “it’s different this time” factors are at work in 2024, and those factors will help support Class 8 demand around a fundamentally weak US and Canadian tractor markets. Those factors include ongoing pent-up vocational truck demand, strong tractor demand in Mexico, a healthy LTL market, and supply chain integrity.
The NA CV forecast reports on the trucking industry forecast, providing a status of commercial vehicle demand, tactical and strategic market analysis and forecasts ranging out five years. The report’s objective is to give OEMs, suppliers, investors, and other interested market participants the information they need to make informed decisions in what is traditionally a deeply cyclical market. The report provides a complete overview of the North American markets, touching on relevant demand drivers starting with forward-looking activity metrics, orders and backlogs. Information included in this report covers build and retail sales forecasts and current market conditions for medium- and heavy-duty trucks/tractors, and trailers, North American macroeconomics by country, freight and carrier market performance, used equipment valuation trends, and regulatory environment analysis and impacts.
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As published in the latest release of the North American commercial vehicle forecast, expectations for Class 8 and trailers are lowered as the recovery in freight markets remains elusive.
“Within the broader Class 8 and trailer markets, US Class 8 tractors and van trailers bore the brunt of the markdowns as freight metrics have failed to gain traction,” according to Kenny Vieth, ACT’s President and Senior Analyst. “Less money in carriers’ pockets and lower industry build rates in 2024 also push down on 2025 and, to a lesser extent, 2026.”
Manufacturing readers especially can appreciate how difficult it has been to attract labor the past two-plus years. If circumstance forces the industry to materially cut production in 2024, thereby having to shed labor, supply-chain integrity could be compromised.
Vieth added, “If layoffs do come to pass, it will be difficult for the industry to scale rapidly in 2025 and 2026 when US and Canadian truckers and dealers will want all the equipment the industry can build. ACT’s research suggests that between prices, taxes, and other affiliated costs, MD and HD vehicle costs will rise by between 12% and 14% as the EPA’s Clean Trucks regulation goes live in 2027. As such, we believe the OEMs will be at least partially successful in convincing customers to begin EPA’27 prebuying in 2024. Starting prebuying earlier should help moderate runaway demand into 2026, but risks prolonging the freight cycle downturn.”
ACT Research believes that “it’s different this time” factors are at work in 2024, and those factors will help support a fundamentally weak US tractor market. Those factors include ongoing pent-up vocational truck demand, strong tractor demand in Mexico, and labor hoarding.
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