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ACT Analyzes Truck Demand Uptick; Suspension of the Restart Regs

December 22, 2014 By: Trucking News Staff Tags: Fleet Management, News, Regulations

Class 8 commercial truck orders rose to the task in November with 40,925 orders, securing the fifth best order month since ACT Research began collecting industry data back in the early 1980s.

Kenny Vieth, ACT’s president and senior analyst, said, “Year-to-date, orders of 336,000 units are up 42.4 percent from last year at this time. Meanwhile, Class 8 has the largest backlog since October 2006. And on a per day basis, November’s build was the second best since December 2006.”

Concerning medium-duty truck demand, Vieth said, “After a strong run from August to October — in part augmented by the annual school bus order surge —medium-duty orders pulled back in November, falling 3 percent year-over-year to 17,691 units.”

These results were published in the latest State of the Industry report, recently released by ACT Research Co. (ACT). The report covers Classes 5 through 8 vehicles for the North American market.

While on the topic of trucking industry successes, Vieth made some observations about the suspension of the hours of service restart regulations in this month’s omnibus spending bill.

“Trucking lobbying interests, including ATA and the Owner-Operator Independent Drivers Association (OOIDA), have successfully worked to amend the FMCSA’s hours of service provisions, rolling back restart rules and directing that additional research be conducted on the issues.

“Our take on the outcome is that it will be a positive for driver productivity and therefore for fleet utilization,” Vieth said, suggesting rough estimates of a 1 to 2 percent improvement in truck utilization at most.

“We calculate the net productivity drag caused by the initial July 2013 implementation of HOS rules to be in the 2 to 3 percent neighborhood. The estimated benefit of rollback reversal is restrained by the change in practices undertaken by motor transportation operators over the last 18 months to comply with HOS.

“Having incurred the transition costs to optimize to the new HOS rules, different fleet operators will likely have varied responses to the rollback,” Vieth continued. “These could range from a complete return to pre-July 2013 operating modes to conformance even if not a mandated, because a change back is sub-optimal.

“The latter course of action makes sense, especially if the further research that FMCSA is now required to conduct gives them justification to come back with re-implementation of similar rules in two or three years.

“A productivity gain of 1 to 2 percent, as we estimate, would ordinarily translate into a potential net loss of upwards of 15 to 20 thousand units of Class 8 production and retail sales over a 12- to 24-month time span,” he said.

“However, these impacts are likely to be more than offset in 2015 and 2016 by the economic, freight and energy factors at work that will bolster truck demand in those years.” He said an analysis published for ACT’s clients earlier this month shows the drop in per barrel crude oil prices from mid-90s to a level near $70 all by itself would add 7 to 10 thousand units to Class 8 demand, as well as 15,000 trailers in each of 2015 and 2016.

“So the restart rollback is a positive for profitability, but the impact on truck productivity will not detract noticeably from the strong market levels we see coming for the next two years,” Vieth said.