Commercial Trucking & Trailers

Bill Corwin analyzes the commercial trucking and trailer industry’s market trends and pricing and provides advice for lenders based on the short- and long-term outlook.

Projected Values (12-Month Outlook)

CURRENT TRENDS

  • Class 8 truck manufacturers fully opened their orderbooks in the fourth quarter of 2022 and October net orders increased 77% year over year.
  • Net September trailer orders totaled 25,700 units, the strongest since the first quarter.
  • Truck and trailer supply chains remain choked with still unmet customer demand.
  • The seasonally adjusted Truck Tonnage Index increased 0.5% in September following a 2.1% increase in August.
  • Auction truck volumes reached an 18-month high in June as values stabilized.

MARKET OUTLOOK

Truck and trailer manufacturing remains challenged as economic rebound continues from the onset of the pandemic and supply chain issues persist. While September 2022 order totals increased as original equipment manufacturers (OEM) filled first-quarter build slots, fleet needs still significantly outpace OEM production capacity under current stressed conditions.

Class 8 Trucks & Trailers Orders Increasing

Constricted post-pandemic production slowed Class 8 truck order rates for most of 2022, but demand skyrocketed in September when manufacturers fully opened orderbooks, resulting in a net order record of 56,500 units. October net orders remained elevated at 43,200 units, which is a 77% increase year over year.[1]

“OEMs are now filling build slots well into Q2 and the early part of Q3 2023. Component shortages continue to be a week-to-week issue; however, the overall sentiment from manufacturers is optimistic that improvements will be made in the coming months and throughout the first half of next year,” noted FTR Transportation Intelligence analyst Charles Roth, after the second consecutive month of robust orders.[2]

The American Trucking Associations’ advanced seasonally adjusted Truck Tonnage Index increased 0.5% in September following a 2.1% increase in August. The September gain put tonnage at the highest level since August 2019 and at the third-highest level on record.[3]

Truck Tonnage Index

Source: https://fred.stlouisfed.org/series/TRUCKD11

“With the economy in transition to slower growth and changing consumer patterns, we may see more volatility in the months ahead. But the good news is that we continue to witness areas of freight growth in consumer spending and manufacturing, which is helping to offset the weakness in new home construction,” noted ATA Chief Economist Bob Costello.[4]

Trailer orders typically decrease in the summer, but 2022 demand remained high. September net orders totaled 25,700 units, which, although down 8.6% over 2021, were up 45% over August and the strongest since the first quarter.[5] However, amid increased order levels, truck and trailer supply chains remain choked with customer demand.

Although supply chain issues, material costs and labor availability cause difficulties for manufacturers to increase build rates, fleets want their orders in the queue regardless of when they will be filled. Currently, fleets do not have the trailers needed and must make up for the shortfall.

New & Used Class 8 Truck Prices Fluctuate

Used Class 8 truck prices have declined for the fifth straight month in 2022 but are up year over year for September. Analysts expect used Class 8 truck prices to continue declining through year end as demand for used heavy-duty equipment returns to a more normal level.[6]

Fleets are feeling the pain of maintaining their trucks past the typical replacement cycle. Tires, parts, maintenance and technicians are all facing inflationary cost pressures, while repairs are also affecting the utilization rate of trucks industrywide because of an aging fleet. While the number of trade-ins may increase, it’s unlikely the market will flood with used equipment because new trucks must replace them.

VALUATION CONSIDERATIONS

Given current market conditions, Gordon Brothers’ commercial trucking and trailer industry experts anticipate equipment values will remain stable in the near term.

[1] https://freight.ftrintel.com/class-8-truck-orders

[2] https://freight.ftrintel.com/class-8-truck-orders

[3] https://www.trucking.org/news-insights/ata-truck-tonnage-index-rose-05-september

[4] https://www.prnewswire.com/news-releases/ata-truck-tonnage-index-increased-2-8-in-august-301628739.html

[5] https://www.ttnews.com/articles/september-trailer-orders-highest-march

[6] https://www.nada.org/atd/atd-insider/atd-truck-beat-class-8-sales-nearly-10-year-over-year


 

Note: THIS PUBLICATION IS PROVIDED FOR INFORMATIONAL MARKETING PURPOSES ONLY. THE MATERIAL CONTAINED HEREIN SHOULD NOT BE REGARDED AS ADVICE, NOR RELIED UPON TO MAKE FINANCIAL, OPERATIONAL OR OTHER DECISIONS; NOR SHOULD IT BE USED AS A SUBSTITUTE FOR AN ASSET APPRAISAL. ACTUAL RECOVERY VALUES MAY VARY FROM TRANSACTION TO TRANSACTION AND THE RECOVERY VALUES REFERENCED HEREIN ARE FOR REPRESENTATIVE TRANSACTIONS WITHOUT REGARD TO SPECIFIC KEY FACTORS. THIS MATERIAL MAY BE REDISTRIBUTED ONLY IN ITS ENTIRETY, INCLUDING NOTICE OF COPYRIGHT. ALL RIGHTS RESERVED. ©2021 GORDON BROTHERS, LLC. REFERENCE SOURCES: U.S. BUREAU OF TRANSPORTATION STATISTICS, TRANSPORT TOPICS, HEAVY DUTY TRUCKING TRUCKINGINFO, FOR CONSTRUCTION PROS, FTR TRANSPORTATION INTELLIGENCE, EQUIPMENT LEASING AND FINANCE ASSOCIATION, AMERICAN TRUCKING ASSOCIATIONS, ACT RESEARCH, THE ALTA GROUP.

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