U.S. sales of new Class 8 trucks in May were a virtual repeat of April results. Manufacturers reported sales of 19,764, just 34 trucks fewer than in April, for a decline of 0.2%, according to data received from Wards Intelligence.
The long-expected downturn in sales continues to stubbornly defy expectations. Low freight rates tend to result in a subdued new truck market as carriers downsize or go out of business. The resulting smaller number of available trucks typically prompts higher freight rates as shippers compete for trucks to haul their product.
This time, however, the cycle isn’t “typical.”
Tim Denoyer, vice president and senior analyst at industry forecaster ACT Research, explained why.
“The record number of operating authority revocations over the past 18 months shows considerable capacity contraction,” he said in a June 18 blog posting. “But we think the ongoing capacity expansion by private fleets is outweighing the capacity contraction.”
There’s also another factor, Denoyer says.
“Elevated equipment demand as fleets gear up for EPA’27 is a key factor likely to drag overcapacity on further,” he said.
While carriers are still buying trucks, they’re placing orders for more.
FTR Transportation Intelligence reported May preliminary Class 8 orders for North America at 18,900 units, up 25% from April and up 37% from May 2023 order numbers.
“Despite the trend of stagnant freight markets, fleets remain willing to invest in new equipment,” wrote Dan Moyer, FTR’s senior analyst for commercial vehicles, in a monthly blog post.
ACT Research reported final May Class 8 orders at 23,560 units, up 51% from May a year ago. Kenny Vieth, ACT president and senior analyst, says much of that order activity is going to build inventories rather than being delivered to customers.
“Given the build was 6,900 units above retail sales in April and May, inventories should have risen,” he explained.
Trailer Sales May 2024
On an adjusted basis, Vieth calculated that “inventories have risen by more than 22,000 truck in the past nine months, reaching levels not seen since 2019.”
While May truck orders were rising, orders for new trailers were down 46% from May 2023 at 6,100 units. The largest decline, by trailer type, was dry van, which fell 85%.
Unlike truck sales, trailer sales do not benefit from the EPA’27 pre-buy and are more likely to reflect the freight market as a whole. Rather than buying new trailers, many carriers are choosing to invest in tractors, allowing trailer inventories to remain stagnant until rates improve.
Used Class 8 Sales May 2024
On the used Class 8 market, sales volumes were up again in May, according to ACT Research. May sales were 7% higher than April and were 30% higher than in May 2023. As carriers downsize or go out of business, those trucks end up on the used truck market, joining the units being traded in by carriers who are upgrading their fleets.
The good news for buyers is this: Increased availability of used equipment has brought prices down. Compared with May 2023, the average used Class 8 truck on the market costs 12% less, has 3% fewer miles and is 6% younger.
Insurance, Interest Rates Rising
Two issues that undoubtedly will impact the sale of new trucks are interest rates and the cost of commercial auto liability insurance. The current Federal Discount Rate for banks to borrow money is 5.5%. Depending on creditworthiness and other factors, used truck buyers can expect to pay higher interest rates and will face tighter loan restrictions. Larger down payments may be required by some lenders, too.
Avery Vise, vice president of commercial vehicles for FTR, used the Producer Price Index (PPI) from the U.S. Census Bureau to explain what’s happening.
“The PPI for commercial auto insurance premiums was up 3% year over year in May,” he said in a June 17 podcast. “That matches the comparison in December of 2019 and is the highest since June of 2019. And 2019 is an interesting comparison because that is a year many of you will remember that we lost a lot of trucking operations, due principally to insurance costs going up.”
While insurance rates are rising, the increase may push more small carriers into closure, decreasing available capacity and prompting freight rate increases.
OEM Sales
Freightliner led the way in May with U.S. sales of 6,800 Class 8 trucks in May, up 4.9% from April but about 27.4% behind sales in May 2023. For the year to date, Freightliner Class 8 sales are down 20.7% from last year’s pace, while the market as a whole is down 14.6%.
Volvo sales of 2,334 represented a gain of 14.6% over April and were down just 5.5% from May of last year, outperforming the market. YTD Volvo sales are down 10.4% from last year’s pace.
Volvo-owned Mack reported sales of 1,613 in May, up 5% from April sales and up 2.6% from May 2023. YTD, Mack sales are down 9.4%.
International sales of 1,911 were down 1.4% from April but were 40.9% lower than an excellent May 2023. For the year to date, International sales are down 39.5%, the largest decline of the major manufacturers.
Kenworth reported sales of 2,876, down 19.7% from April and down 10.1% from May 2023. Year to date, however, Kenworth is outperforming the Class 8 market as a whole with a sales decline of just 2.2%.
Peterbilt has reported similar numbers with May sales of 3,266, down 1.6% from April and down 6.7% from May 2023. YTD Peterbilt sales are just 1.4% down from the same point in 2023.
Western Star has stepped up production and sales this year. May sales of 935 were up 5.2% from April and were up 26.9% from May 2023. For the year-to-date, the company has seen sales rise by 47.8%.
Hino, mostly known for its Classes 5-7 commercial vehicles, reported sales of 29 Class 8 tractors in May. Representing a tiny portion of the Class 8 market, Hino Class 8 tractors are mostly suited for local and regional runs rather than over the road applications.
Continued robust sales of Class 8 trucks are delaying the capacity reduction necessary to start pushing freight rates upward, a situation that isn’t likely to change soon.
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.
