Preliminary Class 8 net orders in April hit highest level since 2006, says ACT Research
A preliminary reading of heavy-duty Class 8 commercial vehicles net orders for North American markets hit 32,800 units in April for a 158 percent annual gain from April 2010, marking the largest monthly order intake since March 2006
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ACT Research, a provider of data and analysis for trucks and other commercial vehicles, said this week that a preliminary reading of heavy-duty Class 8 commercial vehicles net orders for North American markets hit 32,800 units in April.
This represents a 158 percent annual gain from April 2010 and is the largest monthly order intake since March 2006, according to ACT.
“Every cycle has one or two of those months when the breadth of participation rises and a confluence of events leads to these types of results,” said Kenny Vieth, president and senior analyst, in a statement. “April happened to be that month this cycle,” said Kenny Vieth, president and senior analyst. “The list of positive drivers leading to the April order spike is long: Healthy freight, increasing trucker profits, pent-up replacement demand, rising used equipment prices, improving credit worthiness, rising prices for new vehicles, and lead times for new equipment that have pushed out to the end of the year. If that was not enough, there is the accelerated depreciation schedule for 2011 to consider. The challenge now is for the industry to translate all of this demand into trucks.”
The April preliminary data follows a March release of ACT’s North American Commercial Vehicle Outlook, which noted that the fundamentals that support demand in the heavy-duty commercial vehicle market remain strong. In that report 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. 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.
ACT Vice President, Commercial Sector, Steve Tam told LM that one of the core reasons for the strong April data is that the current fleet on the road is aging and is as old as it has ever been.
“We are starting to bring some new iron into the fleet,” said Tam. “This translates into more dependable trucks with fewer breakdowns and lower maintenance costs and improved driver satisfaction, too.
While April was very strong in terms of net orders, Tam said in the past there has typically been an event or trigger to point to determine what is causing a spike in demand. Regardless of whatever the impetus for increased orders may be, Tam said that what happens is the industry gets to a tipping point with limited capacity in terms of the ability to manufacture trucks, leading to apprehension by carriers or private fleet shippers to get their orders in or they won’t get their trucks when they want it or need it.
“There is always this magic point in time where everybody makes this mad dash to the finish line, and it looks like this time it will be the April number,” said Tam. “We think April is going to be the peak of this cycle and that is in line with historical seasonal factors, particularly with the summer months being the weakest months for order intake in the industry. This has more to do with the general acquisition cycle of the carriers themselves. If you order a truck in the summer, you can take delivery at the end of the year and there is no reason to do that-except this time because of the accelerated depreciation tax advantage, which allows a buyer to write off the entire cost of the truck in one tax year. Folks that want to do that need to take advantage sooner than later, which may have served as a driver in the April numbers as well.”
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About the AuthorJeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman
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