Commercial Motor Vehicle Consulting (CMVC) released a new report Wednesday on the economic factors impacting commercial truck sales in 2024.
CMVC states in today's market, financial factors, in addition to the process of bringing capacity in balance with freight demand in line haul applications are weighing on truck sales in the near term. Line haul fleets should have capacity in equilibrium with freight demand by the end of the second quarter, but this does not imply an immediate recovery in Class 8 truck sales, as fleets will have the capacity in place to meet sluggish-to-moderate growth in freight demand.
CMVC states for-hire carriers, who largely operate in line haul applications, will initially absorb higher freight volumes by increasing truck utilization, which will slowly improve profitability, as profits are a function of truck utilization, revenue miles driven and profit margins. The company states a slow upward trend in fleet capacity utilization will gradually swing the pricing pendulum towards carriers from shippers, which will slowly improve profit margins, but CMVC does not expect this to occur until sometime in 2025.
[RELATED: CMVC says aftermarket sales indicator still lagging, drops again]
CMVC reports the focus for fleets in line haul applications in 2024 is to increase truck utilization, improve operating efficiencies and to lower operating costs to improve profitability. This will weigh on truck sales to line haul applications in 2024.
Additionally, truck utilization for fleets in vocational and local/regional applications are within a normal range as capacity is roughly in equilibrium with freight demand, so fleets do not have to make large adjustments in truck investment spending to keep truck utilization high as compared to line haul fleets, but financial factors are weighing on vocational and local/regional fleets’ truck investment spending decisions in 2024.
CMVC says fleets in vocational and local/regional applications are operating with a higher cost base due to the high inflation environment of 2021 and 2022 and the Consumer and Producer Price Indexes indicate slowing inflationary pressures implying businesses are having greater difficulty increasing prices received for goods and/or services received, which is slowing business profits. Slowing business profits will cause firms to adjust capital expenditures, including investment spending on trucks, the company states. In addition, truck affordability has decreased as a result of higher borrowing costs, lower truck trade-in values and higher new truck prices, further weighing on businesses truck purchasing decisions in 2024, the company adds.
[RELATED: ACT Research shows Class 8 orders indicate possible market turn]
Financial factors are weighing on fleets’ truck investment spending decisions across vocations and applications, but line haul fleets are making large adjustments in truck purchasing plans due to the additional factor of bringing truck capacity in equilibrium with freight demand. CMVC says total truck capacity will expand in 2024, truck sales above replacement demand volumes, but at a slower rate than the past few years as fleets adjust to changes in the macro environment.
In the conclusion, CMVC indicates Class 8 tractor demand will not immediately rebound, once line haul fleets have brought capacity in equilibrium with freight demand, as fleets will have capacity in place to meet sluggish-to-moderate growth in freight volumes in the short-term. Vocational and local/regional applications may not have the supply and freight demand imbalances as linehaul fleets, but financial factors are weighing on truck purchasing decisions in 2024, the company says.
