Commercial Vehicle Market Expectations Move Higher

ACT Research reports Demand is sufficiently strong at present that we are turning to historical precedent as a guide for the speed at which the heavy-duty OEMs and suppliers can respond to the demand rally

According to ACT’s latest release of the North American Commercial Vehicle OUTLOOK, even before the pandemic plunge in Q2, there was never serious doubt that the demand for commercial vehicles would rise in 2021.

According to Kenny Vieth, ACT’s President and Senior Analyst, “While the ‘whether’ of the direction of industry demand in 2021 from 2020 has never been in doubt, the speed of the demand inflection has proven to be a particularly challenging answer.” He added, “Demand is sufficiently strong at present that we are turning to historical precedent as a guide for the speed at which the heavy-duty OEMs and suppliers can respond to the demand rally. On top of that, there are two countervailing considerations that we believe could have a direct bearing on the trajectory of the ramp.”

Vieth continued, “The first is the challenge of increasing manufacturing employment during a pandemic, with the added protocols and complexity needed to keep workers safe and socially distanced.” He commented further, “The industry can only build as fast as the slowest supplier.” Vieth concluded, “The second consideration is the time it takes for the industry to shift to materially higher build rates following the start of robust orders. In most cycles the lag is typically around six months. Given the current unemployment rate of nearly 7%, our forecast anticipates that the industry’s ability to ramp production should be close to the typical cycle, as opposed to the 2018 cycle when higher build rates took nine months, due to the constraining nature of a less-than 4% unemployment rate at that time.”

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