Class 8 and Class 5-7 net new orders for December were revised up 6% and 2%, respectively, according to final truck data released by ACT Research. Class 5-8 builds remain strong, up 11% year-over-year in December (vs. up 28% year-over-year in November). Class 8 orders were 18,759 in December, down 51% year-over-year.
"Based on our channel checks, we believe strength in orders was driven partly by exports (again) but this time also from a Freightliner dealer stocking program that ended on Jan. 4," Bear Stearns said in a release. "Under that program, a dealer that ordered two trucks received a $4,500 net promotion credit, a $2,900 retail credit, plus flooring interest reimbursement for up to 90 days, to help offset new model introductory expenses. This was the first incentive activity that we've picked up on for 2007 trucks -- although we generally expect these types of sales promotions to increase industry-wide during the first half of '07."
Class 5-7 orders were 10,218 in December, the lowest in a decade, down 53% year-over-year.
"Class 5-7 inventories deteriorated modestly to 73,694 (roughly 130 days' inventory)," Bear Stearns said. "Our sense remains that OEMs and dealers drove a 'pre-build' in Class 5-7 (in contrast to the Class 8 pre-buy).
"We continue to believe investors greatly underestimate the magnitude of the '05/'06 pre-buy. The average age of the public TL fleet declined from roughly 28 months in '02 to 17 months at year-end '05. Conservatively, we estimate it declined to 14 months at year-end '06. There have been no other secular changes of which we're aware in the end market that would drive a secular decline in fleet ages.
"In 2006, the group's performance was astonishing -- particularly in the face of weakening truck fundamentals and a highly-visible downturn in Class 8 demand. We've struggled with the disconnect between the end market and the OEMs for some time. Our best sense is, it's a case of it doesn't matter 'til it matters."