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Trailer OEM business conditions still 'getting better': ACT Research

Nov. 30, 2022
“[Trailer] demand remains healthy, cancellations are low, and material/component supply-chain constraints are narrowing," says ACT's McNealy

Recent weak economic numbers and higher interest rates do not seem to have impacted the commercial vehicle (CV) sector in any meaningful form, according to this quarter’s issue of ACT Research’s Trailer Components & Raw Materials Forecast. Indeed, demand remains strong.

“Recent discussions indicate U.S. trailer OEM business conditions are on-par with September and seem to be getting better,” said Jennifer McNealy, director-CV market Research & Publications at ACT Research. “Demand remains healthy, cancellations are low, and material/component supply-chain constraints are narrowing. With the availability of 2023 build slots varying widely by OEM, complicated by already long backlogs, customers’ ability to place orders is limited.”

Regarding the impact of inflation on OEMs, McNealy noted that projecting part and material prices has made it tough for manufacturers to set firm prices for trailers currently on order. As a result, most are re-pricing orders with customers as production is set to commence.

And, in response to still-strong business conditions, McNealy remains cautious.

“While we welcome improvements, reports from the field indicate that supply-chain constraints or tight labor markets are not a thing of the past just yet,” she said. “We expect production levels to remain relatively constant in the near term.”

Additionally, ACT Research reported a slightly raised 2022 GDP forecast despite current economic activity, but analysts continue to expect a decline in 2023, according to the latest release of its Commercial Vehicle Dealer Digest.

The Federal Reserve will continue to aggressively raise interest rates so long as inflation remains elevated, suggested Kenny Vieth, ACT’s president and senior analyst, the.

“Not only has the Fed telegraphed this aggressive stance, but economic data suggest the Fed has little choice,” Vieth said. “It is our view the Fed will continue on its course of tighter monetary policy as still deep-pocketed consumers and businesses drive demand for labor in structurally constrained labor markets.”

Factors mitigating a sharper commercial vehicle market downturn in 2023 include pent-up demand and the potential for some prebuying.

“As we have long argued, carrier profits are the critical element in vehicle demand,” Vieth added. “Profits in 2023 are anticipated to be lower, but even modeling a sharp downturn—the worst since 2007—truckload (TL) net margins are projected to be the fourth best on record.”

ACT Research’s Trailer Components & Raw Materials Forecast provides those in the trailer production supply chain, as well as those who invest in said suppliers and commodities, with forecast quantities of components and raw materials required to support the trailer forecast for the coming five years

The Commercial Vehicle Dealer Digest, which combines ACT’s proprietary data analysis from a wide variety of industry sources, paints a comprehensive picture of trends impacting transportation and commercial vehicle markets.