September 18, 2013 by Minuteman Trucks
Surge Raises Industry’s Expectations for 4Q
By Rip Watson, Senior Reporter
This story appears in the Sept. 16 print edition of Transport Topics.
Orders for new heavy-duty trucks climbed 20% last month from a year earlier, boosting expectations that orders will keep rising in the fall and surpass normal seasonal trends, ACT Research reported.
The order total of 19,500 was the highest in three months and topped July’s total by 11%, ACT said.
The group’s report also said orders for Classes 5-7 rose 30% year-over-year to a five-year high of 18,000 during August, which typically is a strong month for those vehicles.
“Overall, it was a pretty good month,” ACT President Kenny Vieth told Transport Topics. “The important takeaway is that the summer is the weakest period of the year for orders. We do expect a transition into the fourth quarter, the beginning of the peak order season. We think orders will rise fairly substantively.”
Vieth noted that recent reports indicate stronger fleet profits and an expectation of improved freight volumes that could spur orders to a monthly average of 23,000 to 25,000 in the fourth quarter.
On a seasonally adjusted basis, Vieth said August’s Class 8 orders pace was about 22,000 trucks, keeping a build rate of 265,000 units this year.
“That level is in keeping with moderate strength we are seeing in the market,” he said.
BB&T Capital Markets analyst Rhem Wood added: “This was an encouraging number as we come to the end of the seasonally slow period.”
Jack Allen, Navistar’s chief operating officer, told TT on Sept. 10, “We are encouraged by a substantial uptick in orders.” Navistar’s market share reached 20% of the industry total for its fiscal third quarter ended July 31, up from 12% the previous quarter.
“Industry sales continue to experience a number of headwinds and tailwinds,” Allen said, citing favorable tonnage levels and freight rates, as well as improved auto and housing markets. However, lagging areas of the economy such as durable goods orders are holding back truck sales, he said.
John Walsh, Mack Trucks vice president of marketing, said, “August orders likely reflect the uptick often experienced by the trucking industry following a slowdown in summer months. We are hopeful that this trend will continue throughout the remainder of 2013.”
And Göran Nyberg, president Volvo Trucks North American sales and marketing, said, “We’re hopeful that August’s increased order activity signals the end of the traditional summer lull and a return to anticipated higher volumes in September and through the fourth quarter.”
From the dealer perspective, Tom Wentworth of Allstate Peterbilt Group said, “Business is headed in the right direction.”
Wentworth, general sales manager for the St. Louis Park, Minn.-based company with 18 locations, said business “continues to improve steadily. Our group has had some pretty respectable increases year-over-year.”
He attributed part of the improvement to a greater emphasis on vocational and specialty markets, such as oil-field and dump trucks.
“Everything is good from our standpoint,” Ken Adkins, president of Charlotte, N.C.-based Advantage Truck Center, told TT.
He estimated business has risen about 9% this year at the company’s five dealerships. Advantage sells Volvo Class 8 trucks and medium-duty Isuzu and Hino models.
“The sales pipeline and deliveries are pretty robust,” he said.
Adkins said proposals and order activity should remain strong for at least the next three or four months.
Dominick LaGambina, fleet sales manager at Minuteman Trucks Inc. in Walpole, Mass., gauged business activity as “fair” at the Navistar dealer.
He said that new Navistar trucks that arrived on the sales lot with selective catalytic reduction aftertreatment technology “will help in the long run.”
Sales were hurt in the past, he said, because Navistar didn’t offer an SCR product. That began to change when the Lisle, Ill.-based truck maker announced the shift to SCR from its exhaust gas recirculation aftertreatment that didn’t gain approval from the U.S. Environmental Protection Agency.
Analysts’ reports reinforced comments by Vieth and dealers.
“We still believe the back third of the year will be stronger,” said Stephen Volkmann, a Jefferies and Co. analyst, in a Sept. 5 report. “These numbers continue the modest and choppy growth pattern we have seen over the past year.”
He said order levels were similar to build rates last month for Class 8s, though he expects production to outpace orders by 5,000 units by the end of the quarter.
Volkmann cited three developments that could alter order patterns during the rest of 2013. One is a potential capacity reduction from the July 1 changes in hours-of-service laws, which could stimulate orders by increasing the need for trucks.
In addition, he said Navistar’s shipping of 13-liter SCR engines could affect orders. Also, he said, customers may have delayed orders instead of being early adopters of Cummins and Freightliner engines that comply with 2014 emissions requirements.
David Leiker, a Robert W. Baird analyst, said in a report that “industry trends are holding” and increased August orders have firmed up manufacturers’ third-quarter production plans.