The prospects for steady growth in 2017 improved significantly for heavy duty truck manufacturers after preliminary reports indicated that orders for March exceeded the numbers registered for the past 16 months.
The industry reports released by FTR intelligence and ACT Research firms separately showed that orders for Class 5-8 weight segments totaled an aggregate of 47,300 units in March. The climb recorded the end of a slump where orders for heavy-duty trucks remained below this mark for the past 16 months. The number of orders was 19% more as compared to the same month in 2016.
The healthy orders signaled an end to the heavy duty truck manufacturer’s woes over the past two years. The industry slump had led many major firms to issue downsizing orders as they waded past weak demand and unimpressive growth rates. However, the orders for March might reverse this trend and lead towards further development of a positive growth outlook for the rest of 2017.
Production cuts and layoffs characterized the industry’s downsizing efforts during the long period of slump but industry experts said that stronger orders would generate renewed optimism and lead to an increase in hiring.
This strong lead in orders would also stand to improve for-hire tonnage, as it experienced a minor dip for the month of February. The resurgence in orders indicates that there will be increased activity in the upcoming months in fields like manufacturing activity, oil rig count and consumer spending, which serve as main drivers for the amount of freight tonnage hauled over North America.
The market for Class 8 segment has witnessed a surprising surge for the industry, rising more than 41% compared to the same month a year ago. This growth shouldn’t have come as neither volume nor pricing have been promising thus far into the year. The big weight categories which include the Class 8 segment rely more on industry fundamentals such as these to remain strong if any growth is to be registered. The optimism behind this increase in orders has to be viewed over the period of next couple of months to ascertain that this was not just a one-off good month for the manufacturers.
Despite positive economic news seeping in in the first quarter of 2017, the industry has revealed mixed growth patterns and industry experts suggest that until sustained growth patterns remain steady, caution should be exercised if firms look to increase manufacturing capacity to negotiate rising demand levels.
Tackling surplus inventory levels would have to be one of the major concerns if trucking orders need to rise. Stagnating orders over the past three years were driven in most part by inventory stuck in warehouses since 2014. Replacement cycles have shown signs of returning to normalcy but it’s still a far cry to expect them returning to fully optimal levels any time this year.
The first three months of this year have been promising as far as sales are concerned. The pickup truck market also registered steady growth amounting to 636,000 trucks snapped up in the first quarter, surpassing sedan sales. That’s a 5.2 gain when compared to the same quarter in 2016. But this buying binge has to be sedated at some point in near future as the factors which weighed in to improve the sales figures slightly like low gas prices are headed towards an increase in prices.
The growth has to be discreet and substantiate the test of a troubled and cash-strapped industry and up till now, the signs have been quite promising and one of the most important of factors in upcoming months that could affect sales positively is the rise of autonomous cars.
The technology is still being tested but it will substantially reduce the value and market of used trucks over the next few years and with freight companies aiming for more advanced, safer modes of transportation, sales for new trucks are going to rise.
However, any disproportionate demand, that surpasses industry’s expected growth levels, would have to ride on an extremely measured wave of optimism by the consumer as even the slightest difference in weightage of factors fueling this optimism could lead to a downward spiral and stagnate the already troubled industry.
The increase in orders could slow down but the industry is certainly showing signs of solidifying its resurgence after a long period of slump.