Prepare for a major shift in the trucking industry. New registrations for Class 8 trucks in the U.S. are projected to reach a total of 249,836 this year, surpassing initial expectations by a whopping 12%. This surge in sales comes as a pleasant surprise, as feared economic challenges failed to materialize.
According to Andrej Divis, the executive director of global truck research at S&P Global Mobility, this forecasted increase in registrations represents a growth of 1.9% compared to last year’s estimates. It seems that 2023 has become a highly fruitful year for truck manufacturers and dealers, defying the gloomy predictions of a recession by S&P Global Inc. analysts.
The replacement and updating of vehicle fleets have been happening at a steady pace, according to Antti Lindstrom, principal analyst for commercial vehicle forecasting at S&P Global Mobility.
The U.S. economy has managed to avoid a predicted recession due to strong consumer spending and a resurgence in services, travel, and restaurants. This has resulted in increased freight and truck activity, as stated by analysts.
While supply chain issues still exist, they are less urgent than in previous years, allowing original equipment manufacturers to fulfill fleet orders and reduce backlogs.
In the meantime, there is a new wave of players entering the trucking sector, attracted by the opportunities in e-commerce and retail. The retail industry, particularly e-commerce, is experiencing significant growth.
In the midst of better-than-expected figures, there are areas of weakness in demand, according to analysts Divis and Lindstrom.
Certain sub-sectors, such as vocational markets and construction, have been significantly affected by increased interest rates. The construction industry has seen a decline in new home starts, which in turn has impacted Class 6 box van sales. It is anticipated that housing starts will continue to be sluggish.
Despite these challenges, overall demand remains strong. The analysts note that the risk of recession has diminished compared to the previous two quarters, and consumer activity has remained resilient.
Divis and Lindstrom predict that sales will start to slow down in the fourth quarter of 2023. This is attributed to a decrease in demand from owner-operators, who experienced growth during the pandemic. The combination of reduced income and higher interest rates has led to this shift, with owner operators being described as the most volatile sector in long-haul trucking.
Big fleet owners have experienced a decrease in revenues due to several factors, including higher interest rates and challenging freight rates, which have impacted demand. According to S&P Global Mobility, sales of Class 8 vehicles are expected to decline by 13% in 2024, reaching a total of 218,136 vehicles.
This decline in sales will also lead to a reduction in Class 8 vehicle production. Class 8 vehicles are known for being the most cyclical of their class; however, there is hope for a rebound in 2025, as S&P Global Mobility predicts an 8% increase in sales, totaling 236,521 vehicles.
Environmental compliance will be the driving force behind demand and production in the U.S. weight class in the coming years, according to analysts.
Proposed greenhouse gas emissions standards by the Environmental Protection Agency are causing traditional manufacturers to reassess their strategies. These stricter regulations will lead to increased purchases in the mid-2020s. Additionally, the analysts predict a strong wave of pre-emptive buying in 2025 and 2026 due to the implementation of the 2027 GHG regulations and the fleet replacement cycle.
The transition towards lower- and zero-emission trucks, particularly in California and other states, will further boost sales. Disruptor brands like Tesla and Nikola will play a role in accelerating this transition while legacy brands are also introducing cleaner versions of their truck models. Limitations in cost, infrastructure, and availability may hinder the adoption of hydrogen and fuel cell technologies, however.
Source: Transport Topics
