According to the report: throughout the year there were 179,000 orders for Class 8 trucks. This was an extreme decrease of 64% when compared to the 497,000 orders during 2018.
How bad is the scenario?.
The continuous downturn that had started in October 2018 had started to impact the Class 8 truck market in early 2019. While there were a few months during the year where orders for durable trucks peaked– although not as high as the previous 2 years, it was all in all a sluggish year for the market..
More just recently, on February 19, 2020, in a compose up on the problem Freight Waves shared: “The ratio of retails sales of Class 8 trucks to stock in January 2020 ranked second-highest in the industry history, trailing just the worst month of the Great Recession a decade back”, signifying that the sturdy vehicle market might continue to experience a down pattern for some more time..
Whats the cause?
The other reason market experts are giving for the drop in Class 8 orders is a market correction. Monitor Daily quotes Act Researchs President and senior expert, Kenny Vieth discussing the decline: “After peak sales and build in 2019, substantial declines are ahead in 2020, as heavy-duty sales and develop follow the net orders trend down. If our projection of continuous (but slower) economic expansion holds in 2020, the drop will be a correction (along the lines of 2015 and 2016), not a devastating economic crisis (as in 2008 and 2009).”.
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According to the report: throughout the year there were 179,000 orders for Class 8 trucks. It has a direct impact on the orders fleets position for new trucks. If the sector is doing well, there is a need to increase the fleet size, hence more orders for new trucks. The decreasing order book for Class 8 trucks has actually currently begun to show its impact. Even the dealers who might have taken extra stock of Class 8 trucks when the market was excellent, will now have to either hold the inventory till there are purchasers in the market or sell their inventory at a discount rate.
The present financial and political scenario in the country has put a stress on the production industry. The United States and China trade war which started in 2018 and the tariffs imposed by the 2 countries on each other has actually been detrimental for business and allied company, including truck manufacturers. If we are to consider the disruption that the Coronavirus is causing in international trade, we can presume that it will be a while before the freight service chooses up again..
It has a direct impact on the orders fleets place for new trucks. If the sector is doing well, there is a demand to increase the fleet size, thus more orders for new trucks.
The expense of maintaining and managing the excess inventory will be another concern that the truck makers will need to handle.
This problem doesnt end at the producers. Even the dealerships who may have taken extra inventory of Class 8 trucks when the marketplace was good, will now have to either hold the stock till there are buyers in the market or sell their inventory at a discount rate. In either case, it will have an unfavorable effect on their bottom line..
Till the freight company does not select up, it will be a rough flight for all the stakeholders in the ecosystem be it– carriers, providers or truck manufacturers..
The cause of the present chaos dealt with by the Class 8 truck production market can be broadly bifurcated into 2 parts..
Whats the effect?.
The decreasing order book for Class 8 trucks has actually already begun to show its effect. According to reports, quite a few truck makers consisting of larger producers like Volvo, Mack Trucks, Daimler, and Navistar have already gone through a settle layoffs or are thinking about cutting their workforce and lowering their production strategies. Cummins, the engine maker is reported to have prepared laying off around 2000 employees in early 2020 and Navistar has already gone through 2 rounds of layoffs last year. When the bigger business are taking such drastic procedures, it will be hard for the smaller producers to tide over this recessionary phase..
The first factor stems from the slowdown in the production sector. It has a direct effect on the orders fleets place for new trucks.
The expense of preserving and handling the excess stock will be another issue that the truck manufacturers will need to deal with. According to reports, the stock to sales ratio was 3.9 months in January, which is much higher than the industrys typical average of 2 to 2.5 months. Till this excess stock is not offered off, the truck makers might have to more cut production strategies and bear an additional burden of their operating funds..
The other factor market experts are offering for the drop in Class 8 orders is a market correction.