Class 8 Cyclicality Alive and Well, Including Regulatory Impacts

CV OUTLOOK is a robust report that forecasts the future of the industry, looking at the next 1-5 years

According to ACT’s latest release of the North American Commercial Vehicle OUTLOOK, over the past decade, the EPA shifted its focus from the tailpipe to fuel economy. On January 6, the EPA released an Advanced Notice of Proposed Rulemaking (ANPR), which promises the return of demand altering regulations that target tailpipe emissions. On top of normal cyclicality is the expectation that the CARB and EPA ANPRs will ultimately transition into [potentially expensive] demand-swinging regulations in the coming decade.

“As illustrated in the Class 8 net order chart, even without regulatory avoidance, the feast-and-famine nature of the business is alive and well,” said Steve Tam, ACT’s Vice President. He elaborated, “Given that freight is by nature cyclical, it goes to follow that carrier profitability is impacted in turn, and history shows a strong relationship between truckers making money and buying equipment.” Tam added, “That relationship hinges on taxes and opportunity: At freight cycle peaks, truckers spin-off much free cash, so willingness and ability to buy rise.”

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