Production of new Class 8 trucks is still constrained by a lack of parts, inventories are all but gone, and used truck prices are so high that they aren’t helping. That’s the U.S. Class 8 truck market in a nutshell.
Perhaps a better picture of the market is this: There were 27,300 new trucks ordered in September, compared to 17,565 actually sold. The North American backlog of orders now stands at 279,000 trucks waiting to be built. If you ordered a new truck today, it wouldn’t even be built until mid-November of 2022.
“If you want a nice comparison, a year ago, September the backlog was 100,200 units,” said Kenny Vieth, president and senior analyst at ACT Research.
Thinking of buying a truck off the dealer’s lot? Good luck with that, according to Vieth.
“What Class 8 inventory there is out there today is what I would call ‘process inventory,’” he explained. “It’s in transit, or it’s at a body builder, or it’s in prep, or something like that. It’s already got a customer name assigned to it.”
In other words, the trucks on the lot are not for sale.
Used truck prices, according to ACT’s August “State of the Industry, U.S. Classes 3-8 Used Trucks” report, were 33% higher this year than at the same point in 2020. At the same time, the average used truck is older and has more miles on the odometer. Inventory is the culprit.
It’s all caused by demand. Freight rates are still at or near record levels, in part because of a lack of available trucks to haul all of the freight being offered. It’s a seller’s market, and carriers are taking advantage of the opportunity to claim higher freight rates. Spot rates remain high for most lanes, too.
It’s a time for the trucking industry to make money. J.B. Hunt Transport Services Inc., for example, reported third-quarter operating revenue of $3.14 billion, a 27% increase over the same quarter of 2020. Similar stories are found across the industry.
When rates are high and freight is plentiful, buyers want more trucks so they can take advantage of the favorable market. Getting those trucks is a problem, especially for those who already have orders in.
“I have to go back more than 10 years to find a lower inventory number for U.S. Class 8 (trucks). Sales is struggling because production is struggling and there’s basically no stock units for sale right now,” Vieth said.
Parts shortages are to blame for most of the lag in production. Semiconductors are likely the biggest culprit, but steel, aluminum, plastics, foam and other needed components are also hard to come by. The semiconductor shortage isn’t getting better any time soon.
According to a Sept. 29 blog post by Kelly Blue Book, the chip shortage will last into 2023. In the blog, Rohm Company CEO Isao Masumoto was quoted as saying, “All of our production facilities have been running at their full capacity since September last year, but orders from customers are overwhelming. I don’t think we can fulfill all the backlog of orders next year.”
Rohm, located in Japan, is one of the largest suppliers of semiconductors for the automotive industry.
Attempts have been made to jump-start an increase in U.S. semiconductor production with an infusion of federal cash. The $52 billion “CHIPS (Creating Helpful Incentives for Producing Semiconductors) for America Act” died without action in the 2020 Congress. It was reintroduced in the 2021 Congress and passed the Senate in July, but it remains in limbo as Democrats and Republicans squabble over various funding bills.
A statement on the Semiconductor Industry Association website in support of such legislation read: “The share of global semiconductor manufacturing capacity in the U.S. has eroded from 37% in 1990 to 12% today, mostly because other countries’ governments have invested ambitiously in chip manufacturing incentives and the U.S. government has not.”
Even if legislation passes, however, it won’t impact the production of semiconductors for months.
To these issues, add record numbers of cargo ships waiting to get unloaded because of labor shortages at U.S. ports. Any of the hundreds of thousands of delayed shipping containers could contain a shipment of desperately needed semiconductors.
If the semiconductor shortage isn’t enough, there’s another potential problem: China has been making noise about taking over Taiwan, claiming the independent island nation is actually a part of the People’s Republic of China. A majority of the world’s semiconductors are made in Taiwan, and any military action could hamper the world supply of chips even further.
Shortages may help explain the differences in sales reported by OEMs. While the total number of trucks sold in September declined by 5.1% from August sales, according to ACT data, individual builder reports were all over the map. Sales at one company, Volvo, increased by 43.6% while sales at another, International, declined by 27.5%, according to information received from Wards Intelligence.
International and Peterbilt saw the largest production drops in September, while International sales fell to 2,080, a decline of 787 trucks from August sales of 2,867. Compared to September 2020, sales declined 7.8%.
Peterbilt sales of 1,910 marked the worst September for the OEM since 2013 and a 26.7% decline from August sales of 2,605 trucks. Compared to September 2020, Pete sales declined by 28.9%
Freightliner sales of 6,703 Class 8 trucks were 0.9% ahead of August’s 6,646 but 13.1% behind September 2020 sales of 7,713.
Volvo followed a disappointing August that saw sales of just 1,193, with a strong rebound to 1,713 trucks sold in September for a 43.6% increase. That number was still 12.6% lower than September 2020, with sales of 1,960.
Volvo Truck sibling Mack Truck topped August sales of 1,495 by moving 1,566 units in September, a 4.7% increase. The result topped September 2020 sales of 1,319 by 18.7%
Kenworth saw an 8.2% decline in sales from August to September, with 2,625 sold versus 2,861 the prior month. Compared to September 2020, sales declined by 6.3%, from 2,800 to 2,2,625.
Western Star reported sales of 534 trucks, an improvement of 4.9% over August and 36.6% over September 2020 results.
Expect the new Class 8 market to remain tumultuous as orders continue to outstrip production capacity and monthly production levels continue to be influenced by the availability of parts.
Cliff Abbott is an experienced commercial vehicle driver and owner-operator who still holds a CDL in his home state of Alabama. In nearly 40 years in trucking, he’s been an instructor and trainer and has managed safety and recruiting operations for several carriers. Having never lost his love of the road, Cliff has written a book and hundreds of songs and has been writing for The Trucker for more than a decade.