ACT: Demand Strong, Supply Constrained for North American Commercial Vehicles

According to ACT Research’s latest State of the Industry: NA Classes 5-8 Report, the North American commercial vehicle industry is facing more problems related to supply rather than vehicle demand.

“With orders remaining hot, backlogs and backlog-to-build ratios jumping, and new vehicle inventories snug, it’s stating the obvious to say that the supply chain’s ability to respond to demand will be the critical determinant of commercial vehicle production this year,” Kenny Vieth, president and senior analyst at ACT Research, said. “To varying degrees, the challenge at the beginning of every cycle is ramping up the manufacturing base to meet rising levels of demand. Thinking back over previous cycles, those early cycle constraints typically include parts that require longer lead times to materially ramp up output.

“While anecdotes indicate that traditional cyclical parts constraints are in play, they may be taking a backseat to more cycle-specific constraints driven by the simultaneous global ramp in economic activity overlaid with pandemic-specific challenges, such as chip shortages, oxygen diverted from industrial to medical uses, steel shortages, and the struggle to keep and grow staff in a pandemic.”

“The economy is growing in all the right places for freight and freight rates and carrier profits have pushed into record territory. This classic set of early-cycle conditions historically drives a freight cycle that runs for around two years, and that strong setup is reflected in Class 8 orders, which are nearing best-ever territory.”

Regarding the medium-duty segment, Vieth said, “The market continues to put down strong numbers, reflecting broad-based strength in goods demand and construction.”

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