ACT Research is recognized as the leading publisher of commercial vehicle (CV) truck, trailer, and bus industry data, market analysis, and forecasts for the North America (NA) and China markets.
See what ACT's experts had to say this month:
As a business in the CV industry, you understand how critical it is to consider macroeconomics when planning for the future. ACT’s view is that a mild recession, starting in 2023 (if it’s not already in place now), is the most likely near-term planning scenario.
Every recession episode is different, and in this one the impact on CVs may be fairly mild, thanks to pent-up demand. While the view of a mild recession with a light touch on trucking is fairly hopeful, we can’t ignore:
All are factors that could contribute to a more severe outcome; however, there is still selective economic strength, most notably in motor vehicles and labor markets. “That’s why we say this is going to be a mild recession ahead, perhaps lasting two or three quarters,” shares Jim Meil, Principal, Industry Analysis at ACT. “But we’re betting on a mild recession.”
While we can’t ignore the downbeat economic conditions at present and yet to come, we also can’t ignore factors mitigating a sharper CV market downturn:
US vehicle manufacturing is finally picking up, as semiconductors and other parts availability improves, helping satisfy pent-up demand and add truckload capacity. As is typically the case in late stages of freight cycles, the clear signal from spot rates should be telling the industry to be more disciplined with capital, but there are still truckloads of pent-up demand. For now, Class 8 equipment demand remains red hot, adding to supply challenges.
In looking at our modest recession we have forecast for 2023, Kenny Vieth, President & Senior Analyst at ACT Research, cautions, “we see ACT’s Freight Composite—a freight-weighted, GDP-based metric that recognizes different economic segments create freight at different rates—contracting next year.”
Interestingly, according to preliminary data in October, the used truck market average retail sales price moved counter to expectations, ticking up a scant 1% m/m. While a welcome change from the monotonous drumbeat of persistent decline, nothing fundamental that would recalibrate expectations has changed.
According to Steve Tam, Vice President at ACT Research, “The declines we’re seeing are a result of the slowing economic and freight metrics. Those are exacerbated, of course, by the lack of inventory because we’re not able to produce new trucks, thanks to the supply-chain constraints.”
Though the economy is slowing and will do so in 2023 as well, saturation of pent-up demand bodes well for the MD market through 2022 and all of 2023.
Regarding the outlook for the MD market, Tam shared, “A little bit less pessimistic on the medium-duty side, we’ve really been challenged in the medium-duty market. We’ve taken a backseat to higher-margin vehicles. It’s logical from a business perspective, but unfortunately, it’s no less frustrating for those medium-duty customers.”
In response to MD pent-up demand, he added, “We’re running about three times our normal average backlog.”
Connecting back to the concept of aging the fleet as we previously discussed for the used truck market, Tam said it also applies to the medium-duty space: “There are a lot of large, sophisticated customers that have very definitive trade cycles, and they’ve been forced, in this situation, to age their fleets. That’s not a permanent solution. It’s a transitory solution, at best.”
From a current market standpoint, strong demand continues for CV trailers. And, according to Jennifer McNealy, Director, CV Market Research & Publications at ACT Research, “From the supply-chain standpoint, we have OEMS being very nimble, trying to mitigate those constraints as best they can.”
Regarding orders, Eric Crawford, Vice President & Senior Analyst at ACT Research, indicated, “We’re past the peak in orders, but 2023 will be about OEMs playing catch up, working down those backlogs.”
Surprisingly, when you assemble the puzzle pieces, our reading is that the prospective recession in 2023 could be the best recession ever for the heavy-duty truck market.
Despite all the headwinds in the economy, we see:
Both factors will drive the industry to solid 2023 sales and build volumes.
Click below to learn more about ACT's monthly published data: