Preliminary orders for new Class 8 trucks tumbled again in November after one month of improved bookings, new evidence that a slowing manufacturing economy is sapping all but critical replacement demand.
FTR Transportation Intelligence reported orders by the six major brands totaled 17,300 units, the slowest November since 2015 and 39% below November 2018, when a frenzied truck order boom was starting to lose steam.
Sluggish orders are resulting in layoffs of hundreds of production workers by Daimler Trucks North America (NASDAQ: DDAIF), Volvo Trucks North America (NASDAQ: VLVLY), Paccar Inc. (NASDAQ: PCAR) and Navistar International Corp. (NYSE: NAV).
The supply chain is also affected. Engine manufacturer Cummins Inc. (NYSE: CMI) is laying off 2,000 white-collar employees globally in the first quarter of 2020.
October and November are historically months when fleets place orders for the next year. Some signs of that appeared in October, which broke 10 consecutive months of lower year-over-year orders. November orders were down 21% from October.
Other than a couple of manufacturers reporting decent activity, total orders fell below expectations, FTR said.
"The freight market downturn worsened in the past month, and uncertainty surrounding trade and tariffs continue to weigh on truck buyers' psyches," said Tim DeNoyer, ACT Research vice president and senior analyst. ACT reported 17,500 preliminary North America Class 8 orders for November.
The stalling of freight growth is causing fleets to exercise caution in placing orders for 2020, said Don Ake, FTR vice president of commercial vehicles.
"There will still be plenty of freight to haul, so we expect fleets will continue to be profitable and to replace older equipment," he said. "However, there won't be a need for much additional equipment on the roads."
Four months of lower manufacturing activity and ongoing uncertainty over tariffs are destabilizing prices and supply chains.
"The industry thrives on stability, but we are now on a rocky road," Ake said.
The rolling 12-month average for Class 8 orders is now 180,000 units. The industry's production backlog has fallen below 130,000 units, less than half the orders waiting to be built in December 2018. Retail sales are still expected to set a record of 310,000 or higher this year.
Private fleets are still adding new tractor capacity, but large for-hire fleets are signaling they will "right-size" the number of trucks to the available freight to haul, DeNoyer said.
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