ACT’s preliminary March data shows net orders of 22,100 units. Sequentially, this represents a 4% dip, but, year-on-year, March ticked up by 10.4%, and as Q1 closes out, NAFTA has a three-month moving average run rate of 269,272 units. Things could have been better; they have also been worse.
But against this number, the most recent US macro data is sounding alarm bells. ISM Manufacturing New Orders for March fell considerably on both a sequential and a year-on-year measure, to 51.4, from 57.8 and 56.8 respectively.
Things might be beginning to look a bit shaky, and the figures for the first three months of 2013 may yet prove to be misleadingly optimistic
Add to this the March ADP Jobs Report, which shows that 158,000 private sector jobs were added to the US economy during the month. This represents the lowest increase since October 2012, but, for the trucking industry, one of the standout points within the data is that, sequentially, the sectors seeing the largest slowdown were construction and trade, transportation and utilities. The construction sector was flat, adding zero jobs. This is the first time in six months that it has not expanded, something that stands at odds with the increasingly exuberant view of a construction-led US economic recovery.
What does this suggest for the fortunes of the truck business through the next quarter? Things might be beginning to look a bit shaky, and the figures for the first three months of 2013 may yet prove to be misleadingly optimistic.
Some of the Q1 strength may be attributed at least in part to orders delayed from the final months of 2012. If sentiment does favour an upturn within construction, then some of these orders might yet prove to be a hedge against such an eventuality; no other transportation segment demands such immediate access to equipment as construction, and it seems plausible that some fleets may be acting to mitigate possible supply delay should construction light up again. Both of these elements will have served to inflate both the number and the expectation.
Both Paccar brands have been pricing extremely aggressively over the past few months, and if they are pricing to suit former Navistar buyers, we can only wonder as to the likely impact on its margins
Against this optimism, and in part due to conversations at MATS, it should be pointed out that the big fleets have now – in the main – placed their orders for 2013. The small fleets remain conspicuous by their absence. Granted, the implementation of Hours of Service legislation in July could create a slight order spike as capacity is tightened, but beyond this, and set against a less than stellar macro backdrop, the best months of 2013 could be behind us.
But one of the more notable stories to come out of the March order data is the development of an almost duopolistic market within North America. While ACT does not provide an order split by OEM, this writer’s own channel checks point to a market now dominated by Daimler and Paccar, with the latter proving the real winner from Navistar’s rebuilding period. A number of sources indicate that both Paccar brands have been pricing extremely aggressively over the past few months, and if they are pricing to suit former Navistar buyers, we can only wonder as to the likely impact on its margins. Paccar reports earnings on 23 April; that may provide for quite 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 Principal at West End Companies, www.westendco.com.
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