ACT Research: Trailer Forecast Cuts Driven by Class 8 Overcapacity and Carrier Profits

Except for trailers, changes to medium duty and Class 8 forecasts this month were small, as published in the latest release of the North American Commercial Vehicle OUTLOOK.

“The trailer forecast receives a more substantive haircut this month, driven primarily by Class 8 overcapacity persisting longer in 2024, weighing heavily on carrier profitability in a period where carriers are more likely to continue spending on Class 8 units due to an expensive EPA mandate landing in 2027,” Kenny Vieth, president and senior analyst at ACT Research, said.

“There is a historically strong relationship between carrier profits and vehicle demand,” Vieth said. “Once a quarter, we get to look at the publicly traded truckload carriers’ financial performance. The opening stanza of 2024 was notably bad for the very good carriers who make up the group. In Q1, profit margins collapsed to a 14-year low 2.6% (3.0% seasonally adjusted). While the profitability drop was in part seasonal, tractor capacity additions through 2023’s freight recession, and into 2024, have left carriers contending with below-operating-cost spot freight rates in an overcapacitized market. This in turn is holding down the group’s ability to boost contact rates, and thereby, profits.”

“We revisited our trailer forecasts based on these near-term considerations: carrier profits, overstocked trailer dealer inventories that are proving hard to move, a short and soft peak order season and increasingly diminished backlogs,” Vieth said. “The N.A. CV OUTLOOK reports on the trucking industry forecast, providing a status of commercial vehicle demand, tactical and strategic market analysis and forecasts ranging out five years. The report’s objective is to give OEMs, suppliers, investors and other interested market participants the information they need to make informed decisions in what is traditionally a deeply cyclical market. The report provides a complete overview of the North American markets, touching on relevant demand drivers starting with forward-looking activity metrics, orders and backlogs. Information included in this report covers build and retail sales forecasts and current market conditions for medium- and heavy-duty trucks/tractors and trailers, North American macroeconomics by country, freight and carrier market performance, used equipment valuation trends and regulatory environment analysis and impacts.”

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