Truck orders fall again in March
April 24, 2012
March net orders for U.S. and Canadian class 8 trucks remained well below 20,000 units for the second straight month, the first time that has occurred since last fall. Orders fell another 9.7% from February to march. The 16,156 units that were ordered represent the lowest level since July 2011. Year-over-year growth moved noticeably negative in March after being nearly flat for the prior 4 months, down 30.3% in March. The year-over-year comparisons will remain difficult next month as we overlap the surge of order activity in April 2011.
Weakness ‘under the surface’
Total North America class 8 net orders came in just shy of 20,000 units for March. This was definitely at the low end of expectations. We initially were not very concerned with the number and felt that it would support the OEM build plans in the second quarter. After final analysis of the full data it appears that things are worse than initially anticipated.
When we broke down the net order numbers to find out when they are scheduled to be produced, we were shocked by its findings and re-ran the numbers several times to make sure that we had not made an error. What we found was that of the nearly 20,000 net orders in March, 7,800 units were for build (and were built) in March.
This is not normal behavior and helps explain some of the increases in inventory that we are seeing. What was even more surprising is that the analysis indicated that zero orders were expected to be delivered in Q2. Normally the second quarter is when truckers want delivery so that they can have the truck in place for the shipping season that starts in late Q2 or early Q3. When you do the math, of the 20,000 units ordered, there were only roughly 12,000 units for future production (since 7,800 were already built in March) and all of those are not scheduled to start getting produced until the third quarter of this year or later. This is not a good sign for the industry and likely why we saw the announcement of one of the OEMs cutting Q2 production immediately.
Our initial expectation that orders would stay relatively healthy through mid-2012 is starting to wane. Order activity is likely to remain subdued as we get into Q2 as fleets focus on the upcoming freight season. However, we are unlikely to see a dramatic drop from current levels. The fleet is still old and carriers will continue to replace aging equipment. We have no expectation for a similar order surge like we saw in April 2011. As such, we are likely to see the year-over-year comparisons be quite difficult until we get into May. Orders always show a high level of month-over-month volatility but we expect volumes to stay relatively low as we get into the summer.
- Source: FTR Associates’ OEM Market Indicator Database
- The graphed data is for U.S. and Canadian truck orders only
- The market indicator data includes all major North American truck builders.
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