Freight Rates Push Vehicle Demand Beyond Ability to Supply Timely
Preliminary reports indicate that February’s net order volume of 24,200 trailers was up 82 percent from the same month last year, according to ACT Research’s State of the Industry: U.S. Trailers report. That was also down 21 percent from January 2021 bookings.
“Given last year’s COVID-related softer economy, year-over-year improvement for net orders is a foregone conclusion over the next few months. February’s sequential decline in net orders was a bit larger than seasonal patterns would project, but was directionally correct,” said Frank Maly, director of commercial vehicle transportation analysis and research. “Preliminary results for the month still show that the industry backlog continued to grow in February, reaching the highest point since March 2019. With many original equipment manufacturers (OEMs) reporting their capacity committed for the year, there may be some reluctance to push the backlog horizon out even further, on both the part of OEMs and fleets.”
The backlog horizon will be pulled forward in response to higher OEM build rates, he suggested, but the February preliminary orders indicate that goal remains “elusive,” with minimal increases in production rates last month.
“Our discussions indicate that staffing remains the primary headwind impeding higher production, with component and material supplies also noted as concerns,” Maly said. “Fleets want to add more trailers to their operations but would certainly like more advantageous delivery time-frames.”
Likewise, according to ACT’s latest release of the North American Commercial Vehicle OUTLOOK, the supply chain’s ability to respond to demand will be the key determinant of Class 8 and van trailer production in 2021.
“With orders remaining hot through preliminary February reporting, backlogs and backlog-to-build ratios continuing to rise, as well as new vehicle inventories tightening. The problem isn’t demand, but supply,” said ACT president and senior analyst Kenny Vieth said. “To no small extent, it appears that the more traditional early-cycle ramping pains, like tires, assorted cast parts, and wiring harnesses, are taking a backseat to more cycle-specific constraints, which begin with the simultaneous global ramp in economic activity overlaid with pandemic-specific challenges.
“Demand is so strong for Class 8 and trailers that 2021 build slots are rapidly selling out. In addition, and despite a strong backlog for the Classes 5-7 segment, there is a very real consideration that medium duty output may be de-prioritized in favor of demand for Class 8 vehicles, as OEMs grapple with supply chain constraints.”