ACT Research says fundamentals for increased Class 8 orders remain intact

Despite an 11 percent decline in net orders for Class 8 vehicles from January to February, the fundamentals that support demand in the heavy-duty commercial vehicle market remain strong, according to ACT Research, a provider of data and analysis for trucks and other commercial vehicles.

ACT officials said that continued strong demand for equipment indicates trucking fleets are ramping up replacement of vehicles, which has largely been deferred the past two years.

And the firm’s most recent edition of its North American Commercial Vehicle Outlook indicates that the economic recovery does support the current order trajectory in conjunction with its projection for increased commercial vehicle production through 2011 and into 2012.

“The initial wave of data for February reinforces our assessment of the January figures and enhances our belief that a self-sustaining recovery is underway in the USA,” said Sam Kahan, ACT’s chief economist, in a statement. “We expect 2011 real GDP growth to average 3.5% on a year-over-year basis; this is toward the upper end of the forecasters range.”

In a preliminary reading of net orders for February, ACT reported that there were 24,300 units ordered in February, which is 3,000 less than January, which came in at 27,300 units and was up 320 percent from January 2010.

This growth follows a 2010 which finished with a strong fourth quarter, with ACT officials noting that the uptick in orders continues to restock industry backlogs, setting the stage for significant production increases into 2011.

One primary reason for such a significant annual gain is because January 2010 was when the Environmental Protection Agency’s 2010 mandate for implementing federal emissions standards in heavy duty trucks. Trucks manufactured in January 2010 and beyond cost on average $8,000-to-$10,000 more than before these efforts went live. This resulted in a mini pre-buy towards the end of 2009, and in early 2010 there were not a lot of Class 8 truck purchases occurring.

In a recent interview with LM, ACT President and Senior Analyst Kenny Vieth said that truckers continue to universally say that they are not adding capacity. But he pointed out that there is a difference between adding capacity and getting capital expenditures back to where it needs to be.

“Generally, truckers have been at below maintenance level capex for the past two or three years,” said Vieth. “Ultimately, it is payback time, as trucks need to be replaced. In addition to the domestic side of the story, the order activity is broad-based, with all of the OEMs participating in all of the North American geographies and not just the U.S. Canada and Mexico are strong right now, as are non-NAFTA markets that are ordering trucks like crazy. It is broad-based, and we are seeing the same thing in the trailer market, with U.S. trailer orders being very robust over the past few months.”

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