MANHASSET, N.Y. – Class 8 production faces significant downside risks in the coming months due to a number of factors including tariffs on trucks and vehicle parts produced in Canada and Mexico, repercussions of a trade war on the freight environment and the Trump Administration possibly eliminating 2027 model year emission standards, which eliminates the expected truck pre-buy in 2025 and 2026.
“In 2024, Class 8 factory sales for trucks retail sold in the U.S. totaled 249,851 units, of which 144,785 trucks were produced in U.S. assembly plants and 105,066 trucks were produced in Mexico assembly plants and none were produced in Canada assembly plants, so trucks delivered to the U.S. marketplace from Mexico accounted for 42.1% of total Class 8 factory sales for trucks retail sold in the U.S.,” said Chris Brady, Commercial Motor Vehicle Consulting.
There are opportunities to shift some Mexican production to U.S. assembly plants, but these opportunities differ by OEM and may be limited by U.S. plant capacity, according to Brady.
Trade War Implications
“The trade war will also have large implications on the freight environment, as a result Class 8 truck demand,” Brady said. “In CMVC’s opinion, the trade war will do more harm than good to the U.S. economy resulting in a soft freight environment.”
Higher import prices will weigh on the growth rate of consumer spending, which has the largest pull upon the supply chain. Higher import prices will also increase businesses’ input prices and costs that cannot be passed along to customers will reduce operating margins, slowing business profits. Businesses will adjust investment spending to slowing profits. Retaliatory tariffs from other nations will reduce the competitiveness of U.S. exports and a trade war will slow global growth as well. The U.S.’ most competitive industries are global, so retaliatory tariffs combined with slower global growth will slow or dampen U.S. output related to exports, thereby weighing on the freight environment. A soft freight environment limits upward pressure on fleets to expand capacity to meet growing freight volumes.
Decline in Class 8 Sales
U.S. Class 8 retail sales rate in the first two months of the year was 224,800 units, seasonally adjusted annual rate, as compared to 258,886 units, seasonally adjusted annual rate, in the first two months of 2024.
“The decline in U.S. Class 8 retail sales rate was a result of fleets in linehaul applications rationalizing capacity in 2024 in response to the soft freight environment,” Brady said. “Linehaul fleets have brought capacity in equilibrium with the soft freight environment, but have spare capacity available in the near term to meet moderately higher freight volumes, so Class 8 truck sales will remain soft in the near term. The trade war is capable of keeping the freight environment soft for an extended period of time, limiting upward pressure on fleets to expand capacity, thereby keeping Class 8 truck sales soft for an extended period of time as well.”
Excessive Inventory
U.S. Class 8 inventories were excessive in February, as dealers’ stocks of 66,879 trucks represented 3.69 months of sales (stock/three month average of truck retail sales).
“If OEMs and dealers are planning on a Class 8 truck pre-buy to help bring stocks in equilibrium with sales then this plan may not come to fruition as the Trump Administration is considering eliminating or reducing 2027 model year emission standards,” Brady said. “If a Class 8 pre-buy does not occur and the freight environment remains soft then it falls upon Class 8 production to bring truck stocks in balance with the truck sales environment. In February, Class 8 deliveries to the U.S. marketplace were 256,683 units, seasonally adjusted annual rate, and U.S. Class 8 retail sales was 224,319 units, seasonally adjusted annual rate, resulting in February inventories increasing by 3,203 units to 66,879 trucks. If there is no Class 8 pre-buy and Class 8 truck sales remain soft then truck deliveries must fall below truck retail sales in order to bring Class 8 stocks in equilibrium with the sales environment, resulting in large decreases in Class 8 production.”
According to Brady, trade war has micro implications upon OEMs’ truck assembly plants as well as macro implications with respect to Class 8 demand and the truck production outlook is further complicated by excessive Class 8 truck inventories and the possible elimination of a truck pre-buy, if the Trump Administration eliminates or substantially alters the 2027 model year truck emission standards.
Dana Guthrie is an award-winning journalist who has been featured in multiple newspapers, books and magazines across the globe. She is currently based in the Atlanta, Georgia, area.
