HDMA Pulse Webinar: “No fast bounce back” for truck industry

Man looking at charts on computerThere will be no quick recovery in truck production, according to Andrej Divis, director, global truck research, IHS Markit, during the Heavy Duty Manufacturers Association’s (HDMA) webinar held Thursday.

Before the impacts of COVID-19, the year started on weak footing, with Class 8 tractors already on a downward trend led by sharply weakening order intakes since the middle of 2019.

“We’re seeing order intake levels we haven’t seen in more than a decade,” Divis said. “April numbers were close to just a couple thousand units — some of the worst results we’ve seen since the last crisis and it’s quite possible the next readings are going to be even worse.”

IHS Markit estimates the industry is going to reduce the active truck population between 5 to 10 percent, which is basically in line with the drop it expects to see in freight during the calendar year.

IHS Markit also studied trends at the plant level across North America. “We estimate the shutdowns compared with what production would have been, which is a bit of a theoretical calculation, but we estimate the shutdowns have cost the industry, on a Class 4-8 basis, more than 30,000 units of production,” Divis said.

In terms of the recovery, Divis said April was 30 to 35 percent below what production would have been without the coronavirus pandemic.

“In May we think we’re going to be a little bit above 50 percent compared with ‘normal’ … then creeping up a little bit in June,” he said. “But the big story is there’s no fast bounce back to 100 percent. The demand isn’t there. There are inventories to be worked down and there’s a lot of other challenges to restarting, including issues such as parts availability, labor issues, etc.”

Suppliers are facing a second quarter decrease in business plan of nearly 45 percent on average, according to HDMA’s Pulse Survey results from its members, said Richard Anderson, director, market research and analysis​, HDMA.

“The most common answer we got was 70 percent reduction in business plan versus Q2 2019, when just two weeks ago [the response] was 50 percent,” Anderson said. “This is likely a reflection of the number of shutdowns that have extended past the halfway mark of this quarter. That means this entire quarter will now have to work that much harder to pull back up.”

Suppliers are most worried about the end user, the fleets, and how their demand will ultimately pull through the supply chain to restart the industry.

“It is interesting to note the truck dealers are viewed as being in a slightly better position than the OEs, possibly a reflection of how many of the larger and more successful dealer groups have diversified their business models, making their position not entirely dependent on the OEMs they represent,” Anderson said.

“The aftermarket … has not suffered quite as heavily as the OE production side. The aftermarket is keeping fleets running today and the expectation from suppliers is, while some of those companies are smaller and may be subject to failure or consolidation, the overall health of that area is not listed as critical,” he said.

As part of HDMA’s Pulse Survey, members were asked what represents the greatest challenge to restarting normal business operations. An overwhelming 78 percent of members responded “Accuracy of production and demand forecasts.” The next closest responses, both at 8 percent, were “Business cash flow” and “Closure mandates of own facilities.”

“Forecasting more so than any physical element is the true bottleneck in the supply chain. Without accurate and responsible forecasting, the restart of production will be slower and more prone to disruption. This has been the central story from our data as this situation has progressed through the month of May,” Anderson said.

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