Won’t get fooled again: Truck manufacturers avoid overbooking Class 8 orders

Class 8 truck manufacturers are trying to avoid a repeat of canceled and retimed orders in 2021 by slowing Class 8 order intake to a trickle and matching builds to the visibility they have into availability of semiconductors and other hard-to-get parts in an ongoing supply chain crisis.

Underlying demand vastly outpaces the number of preliminary orders tracked in March by ACT Research and FTR Transportation Intelligence, the two firms that get real-time order data from major manufacturers. ACT is allowed to report only the forward 12 months of orders, meaning larger, longer-term bookings for new equipment are veiled.

Watch now: Manufacturers trying to avoid canceling orders like they did last year

On a preliminary basis, ACT estimated 21,300 new orders of Class 8 trucks. FTR pegged the number at 21,500. Final industry data for March is due in mid-April.

“March’s net order haul reflects the ongoing conservative approach by the OEMs looking to limit the risk of overbooking and underbuilding that plagued the industry in 2021,” said Kenny Vieth, ACT president and senior analyst. “Long backlogs and supply chain-constrained production activity kept new order activity trending within a narrow range.”

The backlog-to-build ratio is “essentially double normalized levels,” he said.

Navigating the everything shortage

That means manufacturers do not want to add further orders since they do not know when they can build them. Spot shortages of certain parts and components are normal, especially at the beginning of an economic cycle. The so-called everything shortage is different.

Led by a lack of microchips that govern critical functions in a truck — from safety systems to power windows — the supply chain disruption has effectively slowed automotive and commercial vehicle production to a crawl. Numerous plants have taken unscheduled downtime.

Yards full of nearly finished cars and trucks awaiting semiconductors or other parts are parked near manufacturing plants and in other areas around the country. As chips arrive, these “red-tagged” vehicles are completed and shipped to customers and dealers.

OEMs are content to book orders a month at a time, just under current production rates, and keep total backlogs in check, FTR reported.

“The March order total reflects a market frozen in place,” said Don Ake, FTR senior vice president of commercial vehicles. “All the OEMs are evaluating the business environment monthly and only entering enough orders to fill in about a month’s worth of production in the schedule. March’s number indicates that production levels stayed flat.”

That has been the case since December, when some clearing of red-tagged vehicles was indicated by a higher order intake. 

‘Range-bound’

“Class 8 orders remained range-bound, posting a virtual carbon copy of February’s order intake,” Vieth said.

In October and November, manufacturers canceled and retimed orders on their books for the next model year, effectively making a 2022 model ordered in 2021 a 2023 model by the click of  a few keystrokes. The equipment, paint color and everything specified for the order remained the same. Only the model year changed.

Customers typically initiate cancellations as freight demand softens. That is beginning to happen after a pandemic-driven surge in consumer goods purchases. Growing talk of a freight recession could reduce future demand. Fleets have ordered 300,000 Class 8 trucks on a rolling 12-month basis.

“This trend began seven months ago and has not varied much. Once supply chain issues improve, OEMs will be able to substantially increase orders,” Ake said. “But until then, conditions remain stagnant.”

Related articles:

Truck order cancellations spike, but not for lack of demand

Supply chain weakness hits January Class 8 orders

Inability to produce pushes Class 8 orders to lowest November in 26 years

Click for more FreightWaves articles by Alan Adler.

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