One month ago, spectators of the truck industry, particularly the North American sector, were wearing perplexed expressions. ACT data showed March Class 8 orders at a paltry 20,000 units, a figure somewhat at odds with an industry apparently bathing in the warm afterglow of a very positive Mid-America show.
But if March wasn’t very good, April was just plain shocking. ACT preliminary data points to an order rate of just 17,200 Class 8 units for the month, down 14% from March and 55% year-on-year. This is the fourth disappointing month in a row and it’s getting difficult to make excuses for what now seems to be a market that is simply turning down. Last month, we opined that the peak was a lot closer than many in the industry believed; this month we’d readily admit that it’s clearly a lot closer than we thought.
If March wasn’t very good, April was just plain shocking. ACT preliminary data points to an order rate of just 17,200 Class 8 units for the month.
An April intake of 17,200 units translates into a three month moving average run-rate of 238,000 units – far below the 275-300,000 prediction that was doing the rounds at the start of the year. Moreover, there is little on the macro horizon that would encourage a return to a more optimistic stance: while the New Orders component of the ISM Manufacturing Index jumped to 58.2 in April (from 54.5 in March, 54.9 in February and 57.6 in January), it is still well below the year-on-year comparison of 62.7. On a year-on-year basis, New Orders have now been in decline for 13 consecutive months – this metric has traditionally been a robust indicator of the health of the North American truck industry. Measured on a longer basis, logic would suggest April’s uptick is something of an anomaly in the downward trend.
On the ground, Kenworth announced a 10% capacity reduction last month while Volvo took two weeks out of its production during the spring. Despite the Swedish OEM posting a 17% improvement in Q1 net order intake, on a Book to Bill basis, North America’s 107% seems to be rather pale when set against South America (109%) and Europe (117%). Given that North America has been one of the brighter stars in the truck manufacturing firmament in 2012, this weakness is both surprising and, ultimately, rather worrying.
Last month, we opined that the peak was a lot closer than many in the industry believed; this month we’d readily admit that it’s clearly a lot closer than we thought.
Capacity management will be the field upon which the game is won or lost over the next couple of years. If the North American industry needs to be managed down, then this will be a requirement likely to need implementation just as the European market starts to squeak at the edges; the Euro VI pre-buy hasn’t happened yet, but it’s surely only a matter of time.
The prospect of a downturn in North American demand mirrored by a panic in European demand is not one that will be welcomed by anyone in the industry. But has the North American market peaked? Hedge your bets for another month, but if it comes in at less than 20,000 in May, then watch out for the orchestra on the way to the lifeboat.
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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