Orders for new trucks appear to be slowing down as the effective date of the 2007 diesel emissions regulations draws near.
“Class 8 feels like the pre-buy orders are finally winding down,” says Peter Nesvold, transportation analyst with Bear Stearns. “We continue to believe that recent months’ strength has been driven by capacity creep for pre-mandate trucks and not for vehicles with new ’07 engines. On Aug. 31 only 7% of the Class 8 backlog was slotted for the second quarter of 2007 and beyond. In effect, only about 4,000-5,000 orders each month have been for ’07 trucks with ’07 engines. We think that will be increasingly clearer once pre-buy slots are truly sold out.”
According to preliminary reports compiled by ACT Research, customers placed orders for 18,000 Class 8 trucks in October, higher than the 13,000-15,000 that Bear Stearns had forecast, but down 34% year over year.
Class 5-7 orders for October were 15,200, down 29% y/y.
Complete results (including cancellations, retail sales, backlog and revised orders) are due from ACT Research November 16.
“We continue to believe investors greatly underestimate the magnitude of the ‘05/’06 Class 8 pre-buy,” Nesvold says. “The average age of the public truckload fleet declined from roughly 28 months in 2002 to 17 months at yearend 2005. Conservatively, we project it declining to 14 months by yearend 2006. There have been no other secular changes of which we’re aware in the end market that would drive a secular decline in fleet ages.”