Trailers saw the biggest alteration in ACT Research's most recent North American Commercial Vehicle Outlook report, the company announced Wednesday.
“The trailer forecast receives a more substantive haircut this month, driven primarily by Class 8 overcapacity persisting longer in 2024, weighing heavily on carrier profitability in a period where carriers are more likely to continue spending on Class 8 units due to an expensive EPA mandate landing in 2027,” says Kenny Vieth, ACT president and senior analyst.
Vieth adds there is a “historically strong relationship between carrier profits and vehicle demand.” Quarterly, he says ACT gets to look at publicly traded truckload carriers’ financial performance. He says for those operations, the opening stanza of 2024 was notably bad for the very good carriers who make up the group.
“In Q1, profit margins collapsed to a 14-year low 2.6% (3.0% seasonally adjusted). While the profitability drop was in part seasonal, tractor capacity additions through 2023’s freight recession, and into 2024, have left carriers contending with below-operating-cost spot freight rates in an over capacitized market,” says Vieth. “This in turn is holding down the group’s ability to boost contact rates, and thereby, profits.”
As such, he says ACT revisited its trailer forecasts based on these near-term considerations: carrier profits, overstocked trailer dealer inventories that are proving hard to move, a short and soft peak order season, and increasingly diminished backlogs.
