Vocational market lone bright spot in newest 2024 build forecasts

ACT Class 8 truck backlog to build ratio

Two reports published by ACT Research this week point to weaker days ahead for truck production in 2024.

In its most recent North American Commercial Vehicle Outlook report, the company states the vocational market and Mexican market have the strongest projections for 2024 at this point, with U.S. and Canadian on-highway expectations weaker for the year ahead.

“Just as specialty trailer demand remains strong, the U.S. economy is likewise tilted to benefit specialty trucks. Presently, the longest Class 8 backlogs are for U.S. and Canadian vocational trucks,” says Kenny Vieth, ACT Research president and senior analyst. “Like vocational market demand, Mexico’s Class 8 tractor backlog-to-build cushion is more than double that of the U.S. or Canadian tractor markets.”

Vieth says pent-up vocational truck demand, strong tractor demand in Mexico and labor hoarding as reasons for the company’s current market assessment.

“The all-star team of carriers that make up ACT’s carrier database saw second quarter incomes plummet. With spot freight rates still soft and contract rates remaining under pressure, the forecast for carrier profits is continued weakness before incomes begin to expand again in [the second quarter of] 2024. If our forecast for higher profits into the end of 2024 is correct, support into 2025 is on the horizon.”

ACT also reported Wednesday in its State of the Industry Classes 5-8 report that the backlog fell again in August but is likely to begin expanding again soon. The current backlog for Class 8 trucks 152,600 units, with a backlog-to-build ratio of 5.3 months. The Classes 5-7 backlog of 113,900 units also equates to a 5.3 backlog-to-build ratio, slightly up from July after a slower build pace in August.

[RELATED: NTEA releases updated Commercial Vehicle Market Report]

ACT says the 5.3-month number for Class 8 tractors is the lowest backlog-to-build ratio since fall 2020.

“The Class 8 backlog is likely to turn higher in the near term as 2024 order season begins,” Vieth says. “August is one of the weakest months of the year for Class 8 orders, as out-year order boards are not typically fully open. While the tractor market appears under pressure heading into 2024 amid weak freight and falling carrier profits, vocational truck demand remains strong.”

Vieth says August saw net orders up 3,900 units month over month to 19,500 units, and nearly half (42%) of those orders were vocational trucks, well above the historical average of 29%.

He again references the freight market for the bearish 2024 expectations.

“Even with an outperforming economy providing demand-side relief, freight markets continue to bounce along the cycle bottom, with for-hire demand muted as private fleets add capacity and insource freight,” Vieth says. “Pent-up equipment demand, especially for tractors, is likely to fade into year end, but build plans aren’t yet showing the effects of sharp declines in freight rates and carrier profits.”

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