Class 8 build cuts ‘imminent’ says forecast

Inventory accumulation of 4,300 Class 8 tractors over the two months ending in November, versus the 3,300 units across the preceding 12 months, portends a potential inventory surge risk in Q1 2024, according the latest release of ACT Research’s North American Commercial Vehicle OUTLOOK, which highlights the status of commercial vehicle demand, tactical and strategic market analysis and forecasts ranging out five years. The report attributed the risk to the convergence of continued strong build rates, a fading U.S. tractor sales trend and early in the year sales seasonality.

Class 8 truck orders dip sharply in December Net orders fell 15,000 units from the prior month and 7.0% year over year

“Something we marveled at, as late as this September, was the close correlation between build and sales that had kept Class 8 inventory levels, both nominal and relative, near perfectly positioned very late into the cycle,” stated Kenny Vieth, ACT’s president and senior analyst. “Increasingly, with inventories already rising and the sales calendar becoming unfriendly in early 2024, the data suggest this cycle will not provide an ‘it’s different this time’ outcome, with more inventory accrued in the last two months than the preceding 12 months.”

The silver lining, if there is one, he noted, is the assumption that much of the end-of-2023 inventory build occurred in California due to “expensive and complex” CARB regulations that went into effect this month.

Vieth went on to state that while the Class 8 forecast anticipated a production slowdown beginning in Q1, no significant inventory stockpiling is expected to be seen until January and February, so “we are probably early in our call for build rate cuts sooner.”

He went on to point out that the U.S. Class 8 tractor sales rate has been trending lower since the second quarter of 2023 and that January and February are historically the worst months of the year for retail sales.