ACT: COVID-19-Related Services-to-Goods Substitution Increasing CV Demand

In the release of its latest Commercial Vehicle Dealer Digest, ACT Research reported that it expected a rise in commercial vehicle demand in 2021 before the COVID-19 pandemic plunge. The report, which combines ACT’s proprietary data analysis from a variety of industry sources, paints a picture of trends impacting transportation and commercial vehicle markets.

“While the ‘whether’ of the direction of industry demand in 2021 from 2020 has never been in doubt, the speed of the demand inflection has proven to be a particularly challenging answer,” Kenny Vieth, president and senior analyst of ACT Research, said. “Demand is sufficiently strong at present that we are turning to historical precedent as a guide for the speed at which the heavy-duty OEMs and suppliers can respond to the demand rally. On top of that, there are two countervailing considerations that we believe could have a direct bearing on the trajectory of the ramp. The first is the challenge of increasing manufacturing employment during a pandemic, with the added protocols and complexity needed to keep workers safe and socially distanced. And the second consideration is the time it takes for the industry to shift to materially higher build rates following the start of robust orders. In most cycles, the lag is typically around six months.

“While capacity utilization and productivity are concepts normally reserved for the Class 8 market, medium duty vehicle operations are clearly feeling the impact of the services-to-goods substitution evidenced by consumer expenditures, and with freight rates surging and profitability poised to follow, orders turned sharply higher starting in September for van trailers, Class 8 tractors and Classes 5-8 vocational trucks. September saw Class 8 orders surge to a two-year high, followed by even stronger orders in October.”

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