ACT: Strong Freight Rates Mean Strong New Commercial Vehicle Demand

In the recent release of its Commercial Vehicle Dealer Digest, ACT Research reported that the strength in new commercial vehicle demand can be attributed to strength in freight rates.

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.

“Despite, or arguably because of, the pandemic-related pause in Q2, commercial vehicle demand is heading into 2021 with a bang, resulting from consumer and business spending substitution from services to goods, inventory rebuilding and the sidelining of drivers, just to mention a few,” Kenny Vieth, president and senior analyst of ACT Research, said. “An ACT-favorite axiom is ‘fleets buy equipment when they make money,’ and as illustrated in ACT’s aggregation of DAT’s rate data, truckers made money in 2020 and are going to make a lot of money in 2021.

“Since August and through November, spot freight rates have been at record levels and continued to rise in early December. For only the second time in history, spot and contract rates are inverted, with contract rates following spot rates by around five months. This suggests accelerating fleet profitability into 2021.

“A strong freight pipeline and structural and regulatory challenges surrounding driver recruiting suggest an unprecedented level of intractability in the supply-demand balance. Barring an exogenous event, the data suggest strong carrier profits are likely to extend through 2021 and well into 2022. The situation bodes well for new commercial vehicle demand.”

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