ACT Research: Weak Freight Fundamentals and Declining Pent-Up Demand Warrant Caution Ahead

With the 2024 order season opening in September, the Class 8 backlog increased by 8,700 units from August to 161,300 units, and the backlog-to-build ratio increased to 5.5 months, as published in ACT Research’s latest State of the Industry: NA Classes 5-8 report.

“Order season for 2024 kicks off with mixed conditions across the various Classes 5-8 vehicle end-markets. Considerable pent-up demand remains in many vocational markets. Addressing that pent-up demand has become more challenging as the UAW strike impacts MD and HD vehicle production. But Class 8 tractor demand looks markedly softer, consistent with weak freight markets and rates,” Kenny Vieth, president and senior analyst of ACT Research, said.

“Class 8 began the order season with net orders of 36,974 units in September (36.9k seasonally adjusted). While a strong start to ‘the season,’ orders were down 31% y/y. While September marked a good start in filling 2024 orderboards, the follow-through over the next few months will ultimately be more telling for 2024 demand levels. Current weak freight fundamentals and largely sated pent-up tractor market demand make the case for caution,” Vieth said.

“Along with better-than-expected economic conditions, expectations were for spot rates to rise toward the end of this year, which certainly hasn’t yet materialized. That is due, at least in part, to the quirk of private fleets continuing to add capacity even in the face of low rates, following significant service disruptions during the pandemic. In conjunction, ‘labor hoarding’ is occurring among larger fleets, and anecdotally, those fleets are being as creative as possible to maximize driver pay even as they drive less, contributing to the bounce along the bottom,” Vieth said.

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