Low freight rates are weighing on the market for tractors and trailers, panelists on MEMA's Pulse webinar said Monday.
"There are some headwinds here in terms of overall production this year," said Mike Jackson, executive director of strategy and research for MEMA. Jackson moderated a panel discussion with Ryne DeBoer, CEO of the Morey Corporation; Randall Scheps, president of Howmet Wheel Systems; and Rob Allerton, vice president of commercial vehicle membership for MEMA OE.
The panel discussed the results of the How's Business? survey. That survey showed a 12% decline in the forecast for the North American Class 8 production. Scheps says he thinks that's pessimistic; his company predicts more than 300,000 trucks will be made this year, not the more modest 289,000 forecast.
"The annual number doesn't tell the whole story," Scheps said. "You have to look at it quarterly."
He pointed out the first half of the year was hotter than the later half — "it's pretty soft right now" — and also advised looking at the situation with some perspective. Historically, these numbers wouldn't be all bad. But the market has had high build rates for so long that 280,000 trucks feels low.
[RELATED: August MEMA webinar confirms market softness, pessimism]
All three companies say they leverage any forecasts they get their hands on, but it's important to take that data in its context. DeBoers, for instance, says Morey uses those forecasts along with how well the company knows its customers. He can get a feel if customers are feeling aggressive and willing to invest in new materials.
"It's much more art than science," he says.
One thing the panel isn't forecasting: The presidential election. None of the executives said they were trying out different scenarios, but Scheps says he's heard of some fleets delaying capital expenditures not just because of sluggish freight rates, but also to see what happens in the election.
A looming pre-buy ahead of 2027 emissions standards may also be depressing the appetite for new trucks now, but freight rates may be low enough to impact the projected buying spree.
"(A pre-buy) will probably be later and probably smaller than what we might have said a year ago," Scheps said, pointing out some fleets may want to join in a pre-buy, but don't have the financial flexibility to.
DeBoer agreed, and says his company keeps an eye on how money circulates, not just on interest rates and other macroeconomic conditions.
"If rates stay high while inflation continues, it creates a cycle and it's not a winning one," he said.
Companies in the survey are taking action to combat market weakness, with more than 86% of companies reporting some action to improve their bottom lines. Respondents reported layoffs, hiring freezes, delaying capital purchases, eliminating overtime and enacting strict spending controls. The panelists said their companies were doing the same.
Allerton said MEMA members talked about flexibility across the board to help them stay agile amid volatility. Some members say they're shifting capital expenditure spend to accommodate increases and decreases in production volume, changing the shift work to be more efficient and more.
Trailers are another market suffering in these market conditions.
"It's easier to run a trailer one more year than to run an old truck one more year," Scheps said.
The reluctancy to replace trailers may put parts suppliers and other aftermarket companies in the driver's seat.
"People are more resourceful when they need to be," DeBoer said.
That said, the survey and the panelists both said there would eventually be a turnaround, but it's not going to be any time soon. The survey said, at the earliest, a turnaround could be expected in the fourth quarter of 2025, and probably later.
The survey also showed continuing pessimism when it comes to alternative powertrains in commercial vehicles. Very few respondents see significant production of non-ICE powertrains in North America by 2030. Scheps referenced a Ryder study that noted a Class 8 truck with a non-ICE powertrain was twice the cost per mile when compared to a diesel truck.
"Somebody's got to pay that," he said. "The fleet's not going to pay that."
Allerton said there's got to be a customer push for change, and he hears from MEMA members there are more questions than answers, including a lack of charging infrastructure, lack of technicians, low freight rates and a lack of demand from the customers.
"It's all about uptime," Jackson said. "The idea of charging a battery for a semi is pretty remarkable and that alone represents a meaningful headwind."
