Faulty forecasting? Industry suppliers unsure who to believe regarding 2024

user-gravatar Headshot
Updated Jun 1, 2023
White and red trucks in a lot

Truck makers ordering more product than industry forecasts believe necessary is beginning to cause consternation for heavy-duty suppliers, reported MEMA Senior Director of Market Research and Analysis Richard Anderson during the association’s monthly Pulse webinar Wednesday.

In releasing the results of MEMA’s May supplier survey, Anderson says market uncertainty concerns that first took center stage in April grew substantially in May and now stand as the biggest ongoing concern for the supplier community. Anderson says MEMA’s survey responders are frustrated by discrepancies between industry forecasts and OEM forecasts that are adding complexity to business planning for next year.

“Forecast planning is very much the biggest issue for suppliers now,” Anderson says. Inflation, parts availability and labor — the “big three” supplier concerns throughout 2022 — are still creating challenges but have mostly receded into the background as the market has recalibrated to manage them. Anderson says forecasting is now a bigger challenge because suppliers are unsure on what forecasts to trust.

[RELATED: Did you miss last month's Pulse webinar too? Don't worry; we covered it]

Results from May’s Pulse survey indicate suppliers have slightly more confidence in industry forecasts from data firms and experts for the remainder of the year and 2024 than their OEM partners. On a 1-to-7 scale where 1 is low confidence and 7 is extreme confidence, suppliers rate current year OE forecasts at 4.05 and 2024 forecasts and 3.05. For industry forecasts, those averages climb slightly to 4.23 for the current year and 3.64 for next year. Anderson also notes 32% of responders ranked the 2024 OE forecast as a 1 or 2 on confidence and no responder ranked it above a 5.

That sentiment tracked with feelings shared by Wednesday’s webinar attendees.

When asked what they believe to be the biggest problem with forecasts they current receive, 41% of Wednesday’s attendees said, “OE forecasts are inflated to protect the supply chain.” That was followed by 27% who said, “Lack of understanding of current fleet buying behaviors and how they will impact the backlog and future orders.”

Anderson says MEMA’s research backs up that assessment. “Supply chain issues are casting a long shadow,” he says. May’s supplier responders stated to MEMA that they believe OEMs are over-ordering now to ensure they are not hit by any supply chain hiccups. Responders said they expect order cancellations from their OEM partners in the future, they just aren’t sure when. And it’s that not knowing of if, when and how severe those cancellations will be that is so troubling for the suppliers, Anderson says.

Order fulfillment rates for OE and Aftermarket orders are above 90% for suppliers per May’s survey and are expected to remain that those levels (if not increase) in the next six months. Anderson says suppliers are “having great difficulty with their capacity planning,” because they are trying to decide if they’ll need to toggle down their production rates and they’re not sure what to do. Anderson says he’s hopeful OE and industry projections come closer in lines in the months ahead and offer clarity suppliers can use.

Wednesday’s webinar also included comments from S&P Global Mobility, highlighted by a market forecast from Andrej Divis.

Echoing the sentiments from May’s supplier survey and attendees earlier in the webinar, Divis says S&P current forecasting shows softening for the general U.S. economy and truck builds for the remainder of this year and into 2024. Divis says S&P believes OEM production levels will remain high through most of the rest of the year as truck makers try to build as much of their backlogs as possible. The company anticipates “builds are going to downshift in the fourth quarter” and will hold at a lower level than present for most of 2024 before the market kicks upward again in 2025.

[RELATED: Class 8 backlog continues to shrink as production ramps up]

On a larger scale, Divis says S&P’s current base economic forecast for the U.S. does not anticipate a recession — two consecutive quarters of negative GDP growth — for the remainder of 2023 and 2024, though it does track both years to be down from 2022. The company’s current prediction for 2023 is 1.2% GDP growth, with next year at 0.9%. The company’s global projections are slightly higher at 2.3% for this year and 2.6% for 2024.

From a truck production standpoint, he adds S&P is now predicting 319,000 Class 8 units produced in 2023, ahead of demand (300,000 units). Both numbers slip in 2024 as demand slightly exceeds production (272,000 units to 265,000 units).

“We think production will dip as fleets get what they need,” he says.

Learn how to move your used trucks faster
With unsold used inventory depreciating at a rate of more than 2% monthly, efficient inventory turnover is a must for dealers. Download this eBook to access proven strategies for selling used trucks faster.
Used Truck Guide Cover