Class 8 truck orders fall over chip shortage

Class 8 truck orders fell to their lowest level in seven months in April. Manufacturers, wary about ongoing supply chain disruptions, held off accepting bookings as they fret over how many trucks they can deliver in 2023.

On a preliminary basis, truck makers accepted 15,400 to 15,800 new orders. That’s according to industry data trackers to ACT Research and FTR Transportation Intelligence. The monthly average had been about 21,300 over the past seven months. On a rolling 12-month basis, Class 8 orders stand at 280,000.

Incoming order acceptance is under pressure because of a persistent shortage of semiconductors critical to various vehicle functions. Many expected the microchip shortage to ease in the second half.

“We’re just losing confidence that they’re actually going to deliver,” Cummins Inc. CEO and Chairman Tom Linebarger said during an earnings call on Tuesday.

Dour prediction for semiconductors

Recent comments from semiconductor production equipment supplier ASML that the shortage could last into next year has manufacturers worried about their ability to make up for lost production in 2021 and this year.

“With Class 8 backlogs stretching through 2022 and still no clear visibility about the easing of the everything shortage, April’s net orders reflect the ongoing conservative approach by OEMs looking to limit the risk of overbooking and underbuilding that plagued the industry in 2021,” said Eric Crawford, ACT vice president and senior analyst.

In other words, a lower-for-longer order cadence is likely to continue.

Order boards for 2023 have yet to open because manufacturers cannot predict where commodity and other prices are heading. Manufacturers reported strong — in some cases, record — Q1 revenue because they raised prices to offset the rising cost of materials.

“April’s order total does not accurately reflect the current demand for new trucks,” said Charles Roth, FTR commercial vehicles analyst. “It does, however, reflect a market that is trying to minimize its exposure to the headwinds it could potentially face in 2023.”

Paccar exudes confidence

Paccar Inc., maker of Kenworth and Peterbilt trucks in North America and DAF Trucks in Europe, was upbeat on the semiconductor issue on an April 26 earnings call.

“Maybe we’ve gotten through some of the earliest semiconductor issues, and those have not become the most dominant side of it,” CEO Preston Feight told analysts. “So, other little issues come up now. They could be labor-related. They could be geopolitically related. They could be shipping-related. And so, some of them are temporary.”

Demand is so strong that Paccar expects to increase Class 8 truck deliveries in Q2 to 48,000 from 44,000 in Q1, Feight said.

He pointed to a growing U.S. economy, elevated freight rates and a truck age up 10% to 15% as factors bolstering Paccar’s confidence.

“All of those for Paccar are good news in terms of what we expect the future to look like,” Feight said.

On the orders side, FTR forecasts coming months will show little change from artificially depressed bookings that belie strong underlying demand.

“Once supply chain issues improve, OEMs will be able to substantially increase orders,” Roth said. “But until then, conditions remain stagnant.”

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