According to ACT’s latest release of the North American Commercial Vehicle OUTLOOK, two charts can be used to show the strength of both freight demand and heavy vehicle demand.
The N.A. CV OUTLOOK is a robust report that forecasts the future of the industry, looking at the next 1-5 years, with the objective of giving OEMs, Tier 1 and Tier 2 suppliers, and investment firms the information needed to plan accordingly for what is to come. The report provides a complete overview of the North American markets, as well as takes a deep dive into relevant, current market activity to highlight orders, production, and backlogs, shedding light on the forecast. Information included in this report covers forecasts and current market conditions for medium and heavy-duty trucks/tractors, and trailers, the macroeconomies of the US, Canada, and Mexico, publicly-traded carrier information, oil and fuel price impacts, freight and intermodal considerations, and regulatory environment impacts.
According to Kenny Vieth, ACT’s President and Senior Analyst, “The Total Business Inventory-to-Sales ratio bounced off the bottom in May, but remained well below the recent range in this era of multiple sales channels, showing that at May’s sales rate, it would take $150 billion of inventory accumulation to bring the ratio to the low end of its recent range, and suggesting a good pipeline for freight.” He continued, “Add to that the steamships that are piling up on both coasts and there is a strong case to be made for continued strength in freight activity into the end of the year and beyond. It is often said that freight is not a backlog business. Low inventories and stacked-up ports make this period an exception to that rule.”
Vieth added, “The second chart shows the just-completed accounting of the publicly traded truckload carriers’ performance in Q2’21. As illustrated, the entire TL group saw profits rise to record levels in the second stanza, to 7.34%, 10bps above the previous record quarter for profitability set in Q4’18 and 138bps higher than the comparable quarters in the 2018 run-up.” He concluded, “With the freight pipeline filled, the commercial vehicle industry unable to accelerate vehicle production, and seasonal considerations, fleet profitability should continue rising into year’s end and start 2022 on a very strong footing. While our first chart serves as a proxy for strong freight demand, the relationship between carrier profits and heavy vehicle demand are both obvious and irrefutable. The questions that remain are the speed at which fleets overcome driver capacity constraints and the speed at which vehicle production rises once current supply-chain constraints are overcome.”
When asked about commercial vehicle demand and supply chain challenges, he commented, “Medium-duty, heavy-duty and trailer backlogs are essentially filled through 2021 and well into 2022, with BL/BU ratios well above traditional ranges and inventories below traditional thresholds. As has been the case since the start of the year, supply-chain constraints, rather than fleet/consumer demand, are the primary driver of how many vehicles will be produced in 2021.”
ACT Research is recognized as the leading publisher of commercial vehicle truck, trailer, and bus industry data, market analysis and forecasts for the North America and China markets. ACT’s analytical services are used by all major North American truck and trailer manufacturers and their suppliers, as well as banking and investment companies. ACT Research is a contributor to the Blue Chip Economic Indicators and a member of the Wall Street Journal Economic Forecast Panel. ACT Research executives have received peer recognition, including election to the Board of Directors of the National Association for Business Economics, appointment as Consulting Economist to the National Private Truck Council, and the Lawrence R. Klein Award for Blue Chip Economic Indicators’ Most Accurate Economic Forecast over a four-year period. ACT Research senior staff members have earned accolades including Chicago Federal Reserve Automotive Outlook Symposium Best Overall Forecast, Wall Street Journal Top Economic Outlook, and USA Today Top 10 Economic Forecasters. More information can be found at www.actresearch.net.
What’s coming next in 2021 and 2022? ACT’s 65th OUTLOOK Seminar is the planning event for your business needs. Mark your calendar for August 24-26, 2021 to gain market updates and forecasts from ACT’s award-winning, veteran team with more than 200 years of combined industry experience. Click here for more details.
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