American anthems

Trailer manufacturers and their suppliers continue to thrive under ever-changing market conditions across North America.

ACT Research is recognised as a leading publisher of commercial vehicle truck, trailer, and bus industry data, market analysis and forecasts for the North America and China markets.

ACT’s analytical services are used by all major North American truck and trailer manufacturers and their suppliers, as well as banking and investment companies. It is also a contributor to the Blue Chip Economic Indicators and a member of the Wall Street Journal Economic Forecast Panel.

ACT Research executives have also received peer recognition, including election to the Board of Directors of the National Association for Business Economics, appointment as Consulting Economist to the National Private Truck Council, and the Lawrence R. Klein Award for Blue Chip Economic Indicators’ Most Accurate Economic Forecast over a four-year period.

Eric Crawford, Vice President and Senior Analyst at ACT Research, said current commercial vehicle markets continue to prove resilient in the face of aggressive interest rate hikes.

“October Class 8 net orders were robust, all the more so when considering that September orders set an all-time record,” he said. “Meanwhile, unemployment is just off its 50-plus year low, and inflation remains elevated. For now, business activity in the truck industry rolls on, seemingly unphased by higher interest rates. That said, we expect this dynamic to shift in 1H 2023, as the Fed continues its aggressive push to subdue inflation.

The longer inflation remains elevated, the more aggressively the Fed will respond with higher interest rates. This, in turn, increases the chances of a sharper decline in economic activity – and 1) will result in fewer commercial vehicles required to facilitate this subdued level of activity, and 2) will likely exacerbate downward pressure on spot and contract rates, adversely impacting carrier profitability. Cracks in the economy are becoming more evident: the impact of higher rates has begun to slow activity in the housing sector, and large layoffs have started in the tech sector.”

Meanwhile, Jennifer McNealy, Director-CV Market Research & Publications at ACT Research, has commented on major challenges impacting the trailer manufacturing industry in North America.

“While US trailer manufacturers continue to wrestle with rolling supply-chain disruptions, as well as challenges on the labor front, tangible improvements are being made, as illustrated in the build data.” she said. “Demand remains strong: Higher interest rates have not yet begun to impact trailer OEMs or their customers, with ‘yet’ being the operative word in the feedback received from OEMs recently.

OEMs continue to negotiate with fleets, with efforts quickly moving to booked business. Signifying the current tightness in the market, 2023 capacity is filled about as soon as OEMs make it available to customers. We believe demand for 2023 build slots remains quite strong and, as expected, are seeing a jump in order activity as OEMs deepen their 2023 orderboard openings.”

McNealy has also analysed the state of manufacturing in the US based on trailer net order data over the past few years.

“The story of US trailers over the past few years has been more about supply than demand,” she said. “Demand has been and remains very healthy, but the industry’s ability to meet fleet demand has been stifled by supply-chain constraints, globally as well as domestically. This resulted in a significant disconnect between orders and build, but the tables are beginning to turn.

“Demand remains strong and with more 2023 orderboards opening, October net orders continued their upward trend.

“With the supply-chain constraints improving for trailer manufacturers, as well as their increasing nimbleness in meeting and mitigating those challenges, OEMs are more comfortable accepting orders, and the ongoing upward trend in net order data demonstrates that.

“Additionally, backlog-to-build ratios remain in above-target territory, on average, meaning fleets needing trailers are getting in queue and staying there.”

ACT Research Vice President and Senior Analyst, Tim Denoyer, in relation to the transport and logistics industry in North America, said spot rates are now further below costs than ever before.

“While we lower truckload rate forecasts on supply factors, we believe the bottoming process is beginning as spot rates are now further below costs than ever before,” he said.

“November’s report focuses on the key question of how much further spot rates can decline and concerns about diesel shortages, which could hasten the bottoming process. Goods demand is soft and destocking is just beginning, but lower freight costs are set to be a growing disinflationary force in 2023.

“Additionally, power-only truckload brokerage is an interesting trend in US logistics, playing to the strengths of large trailer fleets and enticing more logistics providers to consider trailer fleets. We think the retiring baby boomer demographic and rising drug test failures will tighten the market for professional drivers again in the future, and live-loading is just not the best use of drivers’ time, so this trend is likely to continue. This will require a higher trailer to tractor ratio, key for trailer makers.”

As for opportunities for trailer builders to grow, ACT Research Vice President and Senior Analyst, Eric Crawford, said: “Besides normal cyclicality, one industry trend impacting growth has been the increased adoption of drop and hook, necessitating a higher ratio of trailers relative to tractors.”

In November 2022, ACT Research released a forecast on new trailer components and materials for those in the trailer production supply chain, as well as those who invest in said suppliers and commodities, with forecast quantities of components and raw materials required to support the trailer forecast for the coming five years. It includes near-term quarterly predictions for two years, while the latter three years of the forecast are shown in annual details. Additionally, analysis is segmented into two categories: those needed for the structural composition of new trailers and those used in the production of undercarriage assembly.

“Recent discussions indicate US trailer OEM business conditions are on-par with September and seem to be getting better,” said McNealy. “Demand remains healthy, cancellations are low, and material/component supply-chain constraints are narrowing. With the availability of 2023 build slots varying widely by OEM, complicated by already long backlogs, customers’ ability to place orders is limited.”

Regarding the impact of inflation on OEMs, McNealy added: “Difficulty in projecting part and material prices has made it tough for manufacturers to set firm prices for trailers currently on order. That said, most are re-pricing orders with customers as production is set to commence.”

In response to still-strong business conditions, she cautioned, “While we welcome improvements, reports from the field indicate that supply chain constraints or tight labour markets are not a thing of the past just yet. We expect production levels to remain relatively constant in the near term.”

Commercial vehicle expert, Kent Jones, President – Americas at SAF-Holland, weighs in.

Q: Can you comment on the state of the transport and logistics industry in North America?
A: According to FTR’s Economic & Commercial Vehicle Equipment Forecast, the demand for new trailers remains robust through mid-2023 while truck OEMs are now filling build slots well into Q2 and the early part of Q3 2023. US manufacturers are optimistic that component shortages will improve in the coming months and throughout the first half of next year.

Q: Have you observed any industry trends of note?
A: North America is continuing the trend towards electrification of not only trucks but trailers with both wired and wireless telematic technology systems that provide a robust platform for aggregating smart solutions and sensors.

Q: What is SAF-Holland working on to support trailer manufacturers and fleets?
A: Innovation is crucial to the continuing success of SAF-Holland. SAF-Holland will be introducing the TRAKr electric axle for the North American market. It can be used on all trailers with electrical-consuming units such as refrigerated trailers and electro-hydraulic units to eliminate noise and CO2 emissions. The state-of-the-art technology is designed to meet the strictest legal requirements for inner-city low-emission and environmental restriction zones.
Our Haldex brake and air control solutions allow us to offer a higher level of system integration by combining the entire axle dressed in the suspension, the braking and air control components, all with smart sensor capable technology. We think that’s appealing to many of the trailer makers, and to the fleet users that are in the marketplace today.

Q: What is SAF-Holland’s aftersales support network like? Has it experienced growth?
A: With the recent Haldex acquisition, we gain network growth through consolidation. The addition of the Haldex product line will bring organic sales growth, but more importantly, it will expand our reach, growing our SAF and Holland service part sales.

Q: Has there been growth in aftermarket?
A: According to MacKay & Company, the year 2022 for the US will end with a 16.5 per cent increase in aftermarket growth over 2021, while 2023 is forecasted to be 6.0 per cent over 2022.

Q: Are there any specific products you would like to detail?
A: Our Holland fifth portfolio continues to be the most robust in the industry with offerings to meet all applications, from moderate to standard to severe duty.

Q: Are there any strategic plans or goals you can share for 2023?
A: A high priority goal for our North America operations will be to integrate the Haldex portfolio of brake and air control products into the SAF-Holland Group as quickly as possible to enhance our suspension system offerings, which will deliver a measurable increase in value to our OEM and fleet customers.

We expect more investments in advanced product research and development to the company’s West Michigan world class test lab facility. A focus will be on bringing more and more products with innovations that improve efficiencies for our customers.

Q: Is there anything you would like to mention?
A: From a global perspective, the Haldex acquisition will strengthen our global product brand offerings, which are represented by SAF, Holland, and Haldex. We also continue to support regional markets with the following brands: KLL; Neway; V. Orlandi; Trailer Master; and York.

Fast Fact
Multinational retail corporation, headquartered in Bentonville, Arkansas, Walmart, reported strong revenue growth of 8.7 per cent for Q3 2022. Total revenue was $152.8 billion USD. Meanwhile, e-commerce growth was 16 per cent and 24 per cent on a two-year stack. The company’s operating income was $6.0 billion USD, an increase of 3.9 per cent.

“We had a good quarter with strong top-line growth globally led by Walmart and Sam’s Club US, along with Flipkart and Walmex,” said Walmart President and CEO, Doug McMillon.

“Walmart US continued to gain market share in grocery, helped by unit growth in our food business. We significantly improved our inventory position in Q3, and we’ll continue to make progress as we end the year. From The Big Billion Days in India, through our Deals for Days events in the US and a Thanksgiving meal that will cost the same as last year, we’re here to help make this an affordable and special time for families around the world.”

Fast Fact
FedEx has committed $4.0 billion USD to its ‘Deliver Today, Innovate for Tomorrow’ strategy.

“We’re moving with speed and agility to navigate a difficult operating environment, pulling cost, commercial, and capacity levers to adjust to the impacts of reduced demand,” Raj Subramaniam, FedEx Corp. President and CEO said in September 2022. “As our team continues to work aggressively to address near-term headwinds, we’re meaningfully strengthening our business and customer experience, including delivering an outstanding peak.”

For the first quarter ended 31 August 2022 consolidated operating results were adversely impacted by global volume softness that accelerated in the final weeks of the quarter due to weakening economic conditions. Operating income for the reported period was $1.19 billion USD while revenue was $23.2 billion USD. In addition, results were negatively affected by service challenges at FedEx Express. Yield improvements, including fuel surcharge increases, more than offset the decline in volume, resulting in an increase in revenue for the quarter.

In response, the company implemented cost actions and continued its focus on yield management and revenue quality to mitigate the effect of volume declines. However, the impact of cost actions lagged volume declines and operating expenses remained high relative to demand.

FedEx Express operating income declined 69 per cent due to an 11 per cent year-over-year reduction in global package and freight volume. The impact of cost actions lagged volume declines and operating expenses remained high relative to demand. These factors were partially offset by yield management actions, including higher fuel surcharges.
FedEx Ground operating income increased 3.0 per cent primarily due to yield management actions, including higher fuel surcharges, and growth in FedEx Home Delivery. These factors were partially offset by higher operating expenses, primarily due to increased purchased transportation costs and other operating expenses.

FedEx Freight operating income increased 67 per cent, driven by yield management actions, including higher fuel surcharges, partially offset by higher salaries and employee benefits and lower shipments.

Fast Fact
For the quarter ended 30 September 2022 Amazon’s net sales increased 15 per cent to $127.1 billion USD. In particular, North America segment sales increased 20 per cent year-over-year to $78.8 billion USD. Operating income decreased 5.0 per cent year-over-year to $27.7 billion USD. The business also noted a decline in operating income and net income.

“In the past four months, employees across our consumer businesses have worked relentlessly to put together compelling Prime Member Deal Events with our eighth annual Prime Day and the brand new Prime Early Access Sale in early October,” said Amazon CEO, Andy Jassy.

“The customer response to both events was quite positive, and it’s clear that particularly during these uncertain economic times, customers appreciate Amazon’s continued focus on value and convenience. We’re also encouraged by the steady progress we’re making on lowering costs in our stores fulfilment network, and have a set of initiatives that we’re methodically working through that we believe will yield a stronger cost structure for the business moving forward. There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets. What won’t change is our maniacal focus on the customer experience, and we feel confident that we’re ready to deliver a great experience for customers this holiday shopping season.”