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Supply chain woes still hitting CV industry’s ability to meet demand

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Supply chain woes still hitting CV industry’s ability to meet demand
According to ACT Research’s latest State of the Industry: NA Classes 5-8 Report, Russia/China supply-chain disruptions, raging inflation, higher interest rates and recession potential continue to dominate the narrative.

COLUMBUS, Ind. – Russia/China supply-chain disruptions, raging inflation, higher interest rates and recession potential continue to dominate the world’s economic narrative.

According to ACT Research’s latest State of the Industry: NA Classes 5-8 Report, the trucking industry can expect continued delays related to commercial vehicle production and orders during a time when order volumes remain constrained.

“Russian commodities remain locked out of Western markets, Ukraine remains besieged and China continues to struggle with COVID and lockdowns,” according to Eric Crawford, ACT Research’s vice president and senior analyst. “The battle against inflation is global. US inflation continues to accelerate, prompting the Fed to lift the Fed Funds rate 75 basis points this week, the largest increase since 1994, and markets and economists are increasingly predicting a US recession in 2023.”

When asked what this all means for commercial vehicle markets, Crawford explained that Classes 5-8 production exceeded lowered expectations in May and build plans were largely unchanged while supply-chain risks remain elevated.

“Moreover, we believe the likelihood of a US economic recession is growing and probability of a mild recession is now about as likely as that of our base-case scenario,” Crawford said. “Until build rates find additional traction, orders will largely mirror production levels, but the steep decline in truckload spot rates ex-fuel in recent months will soon impact vehicle demand.”

Overseas, the Chinese commercial vehicle market has been reacting to the domestic and global surges of COVID, along with long-term pressures of market restructuring and new emissions regulations, according to ACT.

Domestic demand for heavy trucks in China fell more than 50% y/y, while the tractor market shrank almost 67% y/y and domestic demand for medium-duty trucks dropped 46% compared to the first quarter of 2021, ACT’s research showed. The weakness continues into the second quarter, with the trough being late in the quarter. Slow recovery is expected throughout the second half of 2022.

With too many trucks chasing available freight, there was little improvement in freight rates, which restrained vehicle purchase demand. Previous emissions upgrade policies that generated pre-buy demand have now resulted in a natural lull. Some support for new vehicle sales was a result of good performance from export markets.

This quarter’s commercial vehicle bright spot came from the large and medium bus market, reporting 2% y/y contraction. That segment’s demand is supported by the country’s move toward the use of alternative fuels, particularly BEVs, for passenger movement, but in Q1 this was set against a backdrop of stunted passenger demand resulting from continuing COVID outbreaks, according to ACT.

The Trucker News Staff

The Trucker News Staff produces engaging content for not only TheTrucker.com, but also The Trucker Newspaper, which has been serving the trucking industry for more than 30 years. With a focus on drivers, the Trucker News Staff aims to provide relevant, objective content pertaining to the trucking segment of the transportation industry. The Trucker News Staff is based in Little Rock, Arkansas.

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The Trucker News Staff produces engaging content for not only TheTrucker.com, but also The Trucker Newspaper, which has been serving the trucking industry for more than 30 years. With a focus on drivers, the Trucker News Staff aims to provide relevant, objective content pertaining to the trucking segment of the transportation industry. The Trucker News Staff is based in Little Rock, Arkansas.
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