Freight transportation consultancy FTR reported this week that it released preliminary data for December 2014 North American Class 8 truck net orders, at 43,620, eclipsed the 40,000 mark for the third month in a row.
FTR said that December’s Class 8 orders was “broad based among OEMs, with almost all manufacturers showing healthy increases from the previous month indicating an overall vibrant truck market.
Along with another strong month in December, FTR added that total North American Class 8 truck orders in 2014 came in at 375,000 units, which represents the second highest order year on record, next to 2004, with fourth quarter 2014 orders second only to the first quarter of 2006.
“The market momentum is now feeding on itself with orders once again exceeding expectations in December,” said Don Ake, FTR Vice President of Commercial Vehicles, in a statement. “Reports are that more than 75% of the larger fleets have their 2015 orders booked. One OEM reportedly has lead times for volume orders out to July. With build slots at a premium, fleets have accelerated orders for 2015 requirements to reserve their places for future deliveries. Some of these orders will inevitably be moved out or even cancelled, but for now the industry is very bullish on the 2015 truck market.”
Stifel Nicolaus analyst Michael Baudendistel wrote in a research note that his firm believes strong Class 8 order strength is being driven by various factors.
“In addition to higher carrier profits (carriers often invest excess cash flows back into their own fleets), we believe orders have been driven by carriers upgrading equipment fleets to new, more fuel efficient vehicles, which can achieve MPG of 8+ compared with 6 MPG or lower for much of the equipment in the field,” he wrote. “We believe that the falling energy prices have not been enough to discourage fleets from upgrading equipment for enhanced fuel efficiency because the MPG gap between new and old equipment is at a historically high level and diesel prices have held up far better than crude prices. In addition, believe replacement demand is a major positive factor as the dearth of late-model/low-mileage (i.e., 4-5 years old with 400,000-550,000 miles) is lessening the incremental cost of new equipment for carriers with valuable used equipment to trade in.”
Joel Clum, president of Chicago-based freight transportation and logistics consultancy CarrierDirect, told LM that the ongoing strength in Class 8 orders, reflects a fair amount of truck replacement, as well as the need to add trucks with automatic transmission to the to drive fuel efficiencies, which is key as diesel prices are at their lowest levels since late 2010.
“Everyone knows they need to get more fuel efficiency as the current pricing for oil and gas is a short-term thing,” he said. “But there is also the need to make improvements to fleets and modernize equipment to replace older pieces of equipment. There is also fleet expansion, too, which I suspect is happening more in mid-sized fleets than in larger fleets.”