ACT Research: Continued Supply-Side Constraints Result in CV Production Forecast Cuts



According to ACT Research’s latest release of the North American Commercial Vehicle OUTLOOK, commercial vehicle production forecasts for this year and next have been cut again, amid continued supply-side constraints.
The N.A. CV OUTLOOK is a report that forecasts the future of the industry, looking at the next one to five years, with the objective of giving OEMs, Tier 1 and Tier 2 suppliers, and investment firms the information needed to plan accordingly for what is to come. The report provides a complete overview of the North American markets, as well as takes a deep dive into relevant, current market activity to highlight orders, production and backlogs, shedding light on the forecast.

Information included in this report covers forecasts and current market conditions for medium and heavy-duty trucks/tractors, and trailers, the macroeconomies of the U.S., Canada and Mexico, publicly-traded carrier information, oil and fuel price impacts, freight and intermodal considerations and regulatory environment impacts.

According to Kenny Vieth, ACT’s president and senior analyst, “In the current period of [near] record demand for commercial vehicles of all stripes, the story the past few months has shifted from one of abundance to one of constraint. While we say ‘semiconductors’ as a generic reference to the supply-chain’s shortcomings, in actuality there are scores of parts that continue to be impacted by the pandemic, by the lingering impact of steel tariffs, and even by the February storm that incapacitated Texas and shutdown swathes of the US plastics industry for two-plus quarters.”

“Like the supply chains themselves, the issues are not only domestic and not only commercial vehicle. And semiconductors might be masking other component issues, but they are at the heart of the supply chain’s woes,” Vieth said. “Closer to home, we illustrate the current disconnect between demand and supply with a Class 8 chart overlaying actual production on the 12-month order average. As the 20 years of data highlight, and not surprisingly, production is highly correlated to the order trend. The order average, breaking through 35/mo. in July, is currently pointing to monthly build volumes that should be approaching 30,000 units/mo. Instead, production through July has failed to crack the March build rate, and July build totaled just 14,920 units, or 710 units per day, as the OEMs resorted to down days and weeks.”

When asked about the impact of the supply chain disruptions on future expectations, Vieth said, “As illustrated in the graph, industry volume forecasting is typically a demand-side exercise. For Class 8, we cut 2021 build expectations for a second consecutive month, but the story is materially different in the medium-duty sector. We attribute the smoother outcomes to-date in Classes 5-7 to the fact that the large passenger vehicle-based market participants are able to pull chips from smaller, lower margin pick-up trucks and put those chips into medium-duty vehicles. Of course, the opposite is also happening amongst the Classes 5-8 producing CV OEMs, with the medium-duty market shedding chips into Class 8.”

 

 

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