ACT points to continued improvement in Class 8 demand in coming years

Data published by ACT Research, a provider of data and analysis for trucks and other commercial vehicles, suggests that various factors are contributing to what could be a strong outlook for commercial vehicle demand in over the next few years.

Among the positive signs ACT points to for future demand include displays of stability and growth in freight-related segments of the economy as well as strong financial performances from publicly-traded carriers.

And according to ACT’s release of its ACT North American Commercial Vehicle Outlook, the firm said it projects full-year 2010 production of Class 8 vehicles to come in at roughly 152,000 units, representing a 29 percent annual gain, but still below normal replacement demand. ACT added that demand will head north in the next two years, with 2012 production moving past 300,000 units, and it also said that weak trailer growth will be on the mend with trailer production expected to hit annual growth rates of more than 50 percent in 2010 and 2011.

“Our forecasts for both 2010 and 2011 have stayed in a narrow range for the past fifteen months as our model predicted a slow economic recovery and deferred investment would create a strong replacement cycle as we moved into 2011,” said Kenny Vieth, president and senior analyst with ACT Research, in a statement. “While headwinds make a full-blown economic recovery unlikely before 2012, recent trends in the transportation and commercial vehicle markets point toward demand for new vehicles building throughout 2011 and 2012.”

Prior to this report, ACT recently published preliminary data on net orders for heavy-duty Class 8 vehicles in North American markets hitting 26,300 units. This estimate, according to ACT, confirms the forecast it has had for the last year, indicating that 2011 would see a healthy year in terms of Class 8 production.

Vieth told LM in a recent interview that based on ACT’s modeling and anecdotal evidence from truckers, it seems like the supply-demand imbalance, which has been tilted away from truckers for the last four years, has gone back to truckers, and it is not abating.

“The economic data continues to be positive and publicly traded carriers continue to see good margins,” said Vieth. “There was a flattening in freight, but profitability held up well and comes to our notion of supply and demand equilibrium between trucks and freight/shippers having swung back into truckers’ favor and truckers should continue to make money.”

Another driver, stated Vieth, is that fleets are aging, with many fleet owners having deferred capital investment—or maintenance costs—for three or four years and have been doing the bare minimum when it comes to putting sufficient levels of capital expenditures into fleets.

“They are now waking up and seeing trucks are costing a lot more to operate and seeing the need to get more trucks,” he said.

While net orders for Class 8 trucks has gone up in recent months from about 16,000 in September to 19,000 in October to more than 26,000 in November, ACT’s average monthly replacement number for North American Class 8 vehicles is around 17,000-to-18,000 trucks per month, with the U.S. number around 15,000.

“These new orders are higher, and you have to go back to the summer when order volumes were weak…when you apply seasonality to them, they were not too far off from the second quarter. We have heard that there were some incentives in the marketplace, and all the OEMs announced 2011 price increases, too. It was a kind of ‘get it while getting is good sale’ in November in terms of placing orders for early in 2011 and going from 16,000 to 19,000 to 26,000 is attributable to some announced pricing increases early in the new year.”