Medium-duty softening, Class 8 nearing production capacity: Economist

NEW YORK — February medium-duty truck sales are up from last year, but still not as strong as expected, according to transportation and investment firm Bear Stearns.

Complete results are available later this week, but preliminary data shows that class 5-7 orders were up 10.5 percent in Feb. from the same period last year, compared to year-to-year growth of 15.9 percent and 15.2 percent in January and December respectively.

Class 8 pre buy in full swing; medium duty on cycle

Bear says the current Class 5-7 cycle is shaping up similarly to the last cycle, although net new orders in medium-duty trucks are more volatile month to month than in heavy-duty trucks.

While the firm previously didn’t expect much of a medium-duty pre-buy, given how long trade cycles tend to be for these vehicles, recent strength has been driven by leasing companies. “Even still, we think it’ll take several more months of strong orders to avoid additional medium-duty capacity cuts, given where OEMs’ inventories are for Class 5-7 trucks.”

“We foresee more production cuts unless Class 5-7 truck (not just bus) if orders strengthen even more soon,” the company continued. This, say the analysts, would not bode well for OEMs that leverage to the medium-duty sector.

As for the heavy-duty market, Bear Stearns believes that Class 8 orders will roll over around mid-May. It estimates that there were roughly 107,800 production slots left as of March 1.

“Assuming orders remain in the 40,000-range near-term, this would imply 2.7 months worth of demand before the backlog sells out.