"Grossly Oversupplied": Used Class-8 Sales Volumes Plunge 12% M/M, Stung By Low Prices And High Inventories

Key indicators for a true V-shaped economic recovery (i.e. actual productivity, not just printing money) for the American economy simply don't seem to be lining up. For example, used heavy duty truck metrics for May are indicating that volumes have plunged 12% sequentially and longer term sales are down 20% year over year. 

The data, released by ACT, shows that YTD sales have still managed to eke out a 2% gain over last year, mostly due to an abysmal 2019, according to Truck Parts and Service. Class 8 average prices and miles barely budged, rising just 2% and 1% respectively from April to May, the report found. 

"Longer term, average price, miles and age all contracted year-over-year, as well as year-to-date, down respectively from the first five months of 2019 by 16 percent, 2 percent and 6 percent," the ACT report notes. 

Kenny Vieth, ACT president and senior analyst commented: “Dealers are reporting that low used truck prices and high inventories were challenges before COVID-19 struck and they continue to be an issue. The upside for people buying trucks is that there are bargains available. Not surprisingly, most sales reps are reporting their business as much slower now than in early March, with some saying they are doing well with dump trucks and other vocational truck types, while aerodynamic sleepers continue to be grossly oversupplied.”

Full Class 8 sales data for June will be available in coming days. 

Recall, in mid-June we noted that Class 8 heavy duty truck orders had crashed 62.5% in May to their lowest levels since 2011. 

Still struggling with the remnants of an order backlog that started almost two years ago with record orders in August 2018, the industry was unable to find an equilibrium prior to the coronavirus pandemic. Orders were sluggish and we noted numerous trucking companies that closed up shop altogether in 2019.

After a 73% crash in April, Class 8 orders once again plunged 62.5% in May, to their lowest sales levels since 2011. Sales came in at just over 9,000, according to Transport Topics

Don Ake, vice president of commercial vehicles at FTR, tried to look at the bright side: “It’s not a horrible number. It’s a fair number under bad conditions. It is going to be a long, slow climb back.”

Dan Clark, head of BMO Transportation Finance, says a V-shaped recovery isn't likely: “Given that the industry is still wrestling with the hangover of a near-record two-year stretch of heavy-duty truck sales, which is now compounded by lower than previously expected economic activity for the next year or two, we aren’t expecting to see a V-shaped recovery in Class 8 sales.”

He believes that orders will remain "choppy" during the second half of 2020, especially heading into the election.