If you missed it, just before Thanksgiving we dove into the conundrum that is new truck inventories and how they’re historically high but also mostly unproblematic.
So far.
I say so far because among the experts I spoke with for the piece, all were in agreement that while inventory totals have trended up, there doesn’t appear to be a glut of new trucks sitting unclaimed and ready to be sold on dealer lots. Most trucks in the factory-to-customer pipeline are still heading toward their important final destination.
Experts told me slowdowns at body builders and upfit facilities is one reason for the inventory increase, as the vocational market is still working through the last vestiges of pent-up demand that have dominated the space in recent years.
[RELATED: Why are new truck inventories approaching record highs?]
A freight market slow to rebound from inflation and economic headwinds was sourced as another inventory driver. While cancelation rates have avoided alarming levels this year, some carriers have been slow to receive the full scope of units they ordered months prior, choosing instead to right-size their operating fleet for the market before adding new units. This has left dealers with units that are spoken for but not delivered.
The good news is, thus far, these challenges have not cratered the new truck market.
The Class 8 inventory to sales ratio is high but it has not risen to levels seen during recent cycle recessions. Additionally, while Class 8 truck sales have slipped below 2023 totals, orders remain up year-to-date, signaling carriers remain haven’t backed off their future purchase plans despite the stall in freight expansion.
But it’s also important to note the market cannot support an uptick in new truck inventories in perpetuity. Demand will need to rise or production will need to fall in the first quarter for the market to avoid a mess.
In chatting with dealers across the country this fall it’s become clear the frustration and limitations of allocation still weigh heavily on dealers’ minds. Everyone hated being unable to order and deliver enough new trucks to meet customer demand during the 2022 market peak and many are willing to scale up their inventories today to avoid falling back into same predicament when freight volumes rise.
Dealers also have varying opinions on the likelihood and scope of a pre-buy ahead of EPA 2027 regulations, but most expect one will occur and appear open to acquiring new units today into 2026 to have equipment ready for customers who want to avoid model year 2027 engines.
This willingness to accept additional units has worked well for OEMs too, who chose not to downsize their production workforces despite the freight recession, mostly due to fears around scaling back up when it concludes.
But none of this can go on forever. We need the freight market to improve, and quickly.
ATA is predicting a slow but welcome recovery to begin in 2025, and ATA boss Chris Spear is hopeful President-elect Trump makes “trucking a priority” when he returns to office in January. Tonnage was up slightly in October.
Let’s hope that’s the start of a new business cycle. The new truck market’s tolerance of high inventories does have a limit. Hopefully carriers ramp up their purchasing before we find out exactly where the limit is.
