Q2 sees further deterioration in Class 8 outlook

ACT Research announced that its US Tractor Dashboard shows that rather than improving as forecasted, the U.S. Class 8 tractor outlook deteriorated further in Q2.

Source: ACT Research

The Dashboard is a metric that provides forward-looking market insight by encompassing variables that take both supply and demand into account. It is published in the latest release of the North American Commercial Vehicle OUTLOOK, which reports on the trucking industry forecast, providing a status of commercial vehicle demand, tactical and strategic market analysis and forecasts ranging out five years.

In February 2024, ACT Research had revised its 2024 Class 8 production and sales expectations upward based on surprisingly strong January orders (up 45% y/y). But while production has continued to expand, sales have progressively weakened.

“Following a -7 reading in March, ACT’s 15-metric Dashboard has posted back-to-back -11 readings, with negatives interspersed through the macro, freight and industry metrics that comprise the aggregate,” according to Kenny Vieth, ACT’s president and senior analyst.

The report cited the following factors:

• for-hire carrier profits are at levels not seen since 2010;
• deep into the bottom of the cycle, there has been no tractor market capacity rationalization to date, only capacity additions;
• excessive capacity expansion has left freight rates at recessionary levels, continuing to prolong the downturn; and,
• while still expanding, the pace of the economy’s recovery is running at about half the 4%-plus GDP rate of 2H’23.

Even given these conditions, there are still several pockets of strength in the Class 8 market.

“Were these ‘normal’ times, the implied stepdown in support would be signaling increased tractor market weakness into next year,” Vieth noted. “The wildcard as we look to 2025 is carriers’ appetite to add equipment ahead of the EPA’s expensive 2027 clean truck mandate.

“Typically, the market’s individual components tend to be more closely sync’d and cycle together into a market downturn. With North America’s economies all growing, and recognizing tractor market risk to the forecast, there are certainly positive factors at play as we look to 2025 — robust U.S. and Canadian vocational markets and the best Mexican market in a decade are certainly helping to offset the impending trough in tractor demand that is expected to last into mid-2025.”