Market Overview

New trailer orders fell to near zero in April

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Preliminary net orders for trailers in April fell to just 300 bookings, the lowest level since 1990.

The 95% drop in orders from March and 98% decline from April 2019 put orders during the past 12 months at 162,000, according to FTR Transportation Intelligence.

The impact of the health crisis on manufacturing and an already slowing market for equipment combined to cause many fleets to effectively close their order books and cancel or push out orders scheduled for 2020 delivery.

"There are still way too many uncertainties present for fleets to buy new trailers in large numbers," said Don Ake, FTR vice president of commercial vehicles. "They will take the minimum number of trailers needed in the short-run and then increase quantities dependent on the speed and size of the recovery. 

Downward trend

Except for 2016, trailer shipments have risen every year since 2011. They set a record in 2018 that was broken in 2019 when 328,000 units were shipped and 333,000 units were produced, according to ACT Research.

A pullback to an estimated 239,000 units in 2020 was ACT's initial projection, in line with typical replacement demand of 220,000 units. But the COVID-19 pandemic led ACT to reduce its estimate to 146,000 units, a 56% decline from 2019. FTR anticipates new trailer production to be approximately 155,000 new trailers in 2020, down 53% from 2019.

"Orders should improve soon, but are expected to remain modest for the next few months,"

Ake said.

Industry consolidation

The pullback raises questions about the financial viability of the industry's weaker players being able to survive the economic downturn.

Wabash National (NYSE: WNC), the only publicly traded trailer maker, said it is too soon to predict.

"I'm not going to speculate on acquisition roll-up or consolidation activity; that's too early to talk about," Wabash National CEO Brent Yeagy said in response to an analyst question on the company's first-quarter earnings call on May 14.

Specialty equipment builders could be impacted, said Mike Baudendistel, a FreightWaves market expert.

"We could see consolidation among some of the smaller trailer manufacturers within the industry's top 25," he said. "Equipment for industrial activity, such as flatbed trailers or trailers for logging, are likely to be disproportionately hurt by a lack of new construction activity."  

April shutdowns

FTR said the dry van segment was hit particularly hard, with refrigerated van orders somewhat less impacted in April. Vocational orders, which fell significantly in March, remained tepid in April.

Numerous manufacturers shut down for part of April, including Wabash National for two weeks. It plans another furlough from June 29-July 3, according to its 10-Q filing with the U.S. Securities and Exchange Commission.

"Fleets remain in a severe wait-and-see posture until they can evaluate the damage done to the freight markets from the pandemic," Ake said. "Since the recovery from the economic crisis is highly dependent on the status of the health crisis, there is a huge amount of uncertainty in the trailer market."

In its quarterly Trailer Components Report, ACT said the production pullback puts pressure on component and material supply chains to cope with orders being pulled ahead to support near-term production before line rates are reduced, resulting in layoffs. 

 

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