ACT Research: Weak Orders Caused by Low Confidence

In an environment that should support healthy demand, a lack of confidence by the credit-buyer side of the market is at the root of the three-month downturn experienced in the Class 8 market, according to ACT Research.

In the most recent issue of the State of the Industry report, Kenny Vieth, president and senior analyst at ACT said, “If the pullback in orders was freight-related, we would have expected to see a run-up in cancellation activity, which has not been the case. This suggests to us that the problems with demand are not systemic.”

In the report that covers Class 5 through 8 vehicles for the North American market, Vieth said, “Smaller truckers who have to borrow to buy are most likely driving older trucks with relatively low values. Those truckers need to borrow $90,000-$100,000 to finance a new truck, but their confidence has been shaken by a number of events in early 2012, including economic concerns, a 9.5% jump in fuel prices through Q1, and inconsistent freight early in the year.”

Vieth said that a continuation of reasonable freight growth, healthy trucker profits and rising used truck prices are expected to support Class 8 demand once the current period of uncertainty is worked through.