By any standards, the current form of the US Class 8 market is mixed. Final truck data for May released by ACT shows that new net orders were down 23% year-on-year to 17,988 units. This is in part a reflection of a tough comparison with May 2011 a month in which sales spiked by 77% over the previous year. Production, on the other hand, rose by 30.6% year-on-year to 24,581 units and North American inventory now sits at a fleshy 62,940 units. For reference, May’s production number is the best it has been since January 2007, and, for each month of 2012 so far, production activity has grown against sales.
Final truck data for May released by ACT shows that new net orders were down 23% year-on-year to 17,988 units. This is in part a reflection of a tough comparison with May 2011 a month in which sales spiked by 77% over the previous year.
Orders in decline and inventory on the rise point to a fundamental disconnect twixt supply and demand, and so there seems to be an increased reluctance on the part of the buyer to buy. Significantly, order cancellations are also on the move, up to 10% from 7% in April.
What does it mean? Clearly, there is now a surfeit of supply over demand, and various channel checks point to a growing degree of discounting within the marketplace. Clearly, we should expect the OEMs to revise downwards their estimates for FY2012 build at some point – 275,000 was a number often cited at the beginning of the year, but is now looking almost charmingly naive in the light of five months of mediocre data – and a cohort shift to pessimism will do much to dim the lights on Planet Truck.
Perhaps more worrying is the inventory issue. If the distribution channels move to clear their decks in 2012, then those trucks sold at a discount this year will not be sold at anything approaching a premium next year, a period during which there is the possibility of a post-buy driven by greenhouse gas legislation. As such, we may now be witnessing not just the peak of the cycle – it’s getting increasingly difficult to form an argument stating that the past five months constituted a temporary blip – but also an extended downslope as we move into the next cycle.
If the distribution channels move to clear their decks in 2012, then those trucks sold at a discount this year will not be sold at anything approaching a premium next year, a period during which there is the possibility of a post buy driven by GHG legislation.
However, the fleet age in North America is still well advanced and truck use remains high, suggesting that there are still some significant drivers in play at this level. While the macro situation is now one that is entirely febrile, ISM New Orders breached 60 (60.1%) in May – positive year-on-year for the first time since April 2011, while the Cass Freight Index was also up by 2.2%.
We are now entering the quiet summer months – activity is likely to be muted until August. Will it pick up again? The numbers point to a ‘maybe yes, maybe no’ scenario here, which is no use to anyone attempting to make plans, but is of interest in terms of the shape of the market. North American truck has tended to be a fairly binary place: it’s either on or it’s off. During this cycle, it’s proving to be neither. Initial June numbers will be available any time soon, and they will make for some interesting reading.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Oliver Dixon is Editor, World Truck Analysis.
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