Strength in North American Class 8 orders continues, reports FTR

Strength in North American Class 8 truck net orders remained firmly intact in January, based on data recently issued by freight transportation consultancy FTR.

FTR’s preliminary data for January showed 35,060 units ordered, which was down from how 2014 ended, with three straight months of 40,000-plus units ordered. Final December orders were 43,801, which was up 7.9 percent compared to November and up 39.2 percent annually.

But even though orders may not have held serve with the end of 2014, FTR said that January’s activity represents the best performance for the month going back to 2006 while posting a 2 percent annual gain, as orders for January 2014 showed a more traditional pattern.

FTR noted that the majority of Class 8 truck OEMs have maintained strong order momentum, as Class 8 orders over the last 12 months are at 377,000.

“Even though orders were their lowest in the last four months, the market remains very robust,” said Don Ake, FTR Vice President of Commercial Vehicles, in a statement. “Fleets are now trying to determine their requirements for the entire year and then place orders accordingly.  With limited build slots available, they have to be more strategic in their buying decisions. We should see more normal ordering cycles for the next few months.  The orders this month continue to support the strong FTRforecast and are right in line with our expectations.”

Stifel Nicolaus analyst Michael Baudendistel wrote in a January 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 in a recent interview 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.”