Trade forecaster FTR has the unenviable job of making an attempt to foretell the place the business automobile markets are headed, when even those that construct the vans are unsure about what the long run holds. Nonetheless, Don Ake, vice-president business autos with FTR, went forward along with his daring predictions at FTR’s 2022 Transportation Convention.
Right here’s what he stated attendees must know in regards to the business automobile market:
Demand stays sturdy
Whereas there’s elevated threat round Ake’s forecast for the business automobile markets, he stated demand remains to be undeniably robust. If a recession does happen and has a significant influence on business automobile demand, he stated it seemingly gained’t be till subsequent 12 months.
That demand is pent-up
A giant motive Ake isn’t involved about demand, is that there’s “big” pent-up demand that truck producers haven’t been in a position to meet as a consequence of provide chain challenges. He calculates North American Class 8 demand totals about 150,000 items, about 85,000 of that are for fleet growth whereas one other 65,000 are for substitute items.
Even when there’s a market downturn, these substitute items will nonetheless be wanted, Ake identified.
“No matter what occurs within the economic system, until it’s actually extreme, they’re going to switch these vans,” Ake stated of fleets needing to commerce in older items. “That provides us some stability even when the economic system has fluctuations.”
Order volumes don’t inform the complete story
Order volumes are misleading, Ake famous, since truck producers aren’t coming into orders a lot into 2023. Lingering issues about the associated fee and availability of elements and uncooked supplies are limiting order consumption and never reflecting true demand.
In July there was a Class 8 backlog of about 210,000 items in North America, which Ake described as a “respectable stage.” The backlog-to-build ratio can also be regular. However the backlog continues to be cautiously managed by OEMs, he added. The true backlog might attain as excessive as 400,000 items subsequent 12 months.
Provide chain points stay
“They’re not going away and never getting significantly better,” Ake stated of provide chain points and their influence on truck producers. “OEMs are saying ‘Now we have no visibility. We’re not in a position to plan.’”
The excellent news is, provide chain points don’t seem like getting worse, he added.
Output is bettering…
Whereas truck OEMs aren’t out of the woods but on the subject of the availability chain, issues are bettering. They’ve elevated Class 8 construct ranges 13% from Could 2021 to July 2022. This 12 months ought to see about 296,000 Class 8 vans produced, which Ake stated “Will not be a nasty 12 months, all issues thought of.” Whereas the 13% enchancment in construct ranges is noteworthy, Ake added it did take greater than a 12 months to attain.
…however dangers are important
FTR’s Class 8 forecast doesn’t bear in mind the potential of a recession, however fairly continued financial development. If there’s a recession, the idea is that substitute demand will assist producers climate it. However, added Ake, “the Nice Unknown,” can’t be ignored given what the world has skilled of late.
Potential is large
Lastly, stated Ake, if all goes effectively, there’s massive potential as soon as at this time’s challenges are alleviated. FTR predicts Class 8 manufacturing unit shipments will stay regular within the first quarter of 2023, climbing to 82,000 within the second and third quarters of subsequent 12 months, earlier than falling to 79,000 within the fourth quarter. That will deliver annualized shipments to 320,000 items subsequent 12 months in comparison with 296,000 this 12 months. In truth, the outlook stays good proper by means of 2026, Ake stated. However he added, “The economic system has to hold in there and generate freight. So long as freight is being generated, this forecast is stable.”