Trailer Forecast Cuts Driven by Class 8 Overcapacity and Carrier Profits

ACT Research reports carriers are more likely to continue spending on Class 8 units due to an expensive EPA mandate landing in 2027

Except for trailers, changes to medium duty and Class 8 forecasts this month were small, as published in the latest release of the North American Commercial Vehicle OUTLOOK.

“The trailer forecast receives a more substantive haircut this month, driven primarily by Class 8 overcapacity persisting longer in 2024, weighing heavily on carrier profitability in a period where carriers are more likely to continue spending on Class 8 units due to an expensive EPA mandate landing in 2027,” according to Kenny Vieth, ACT’s President and Senior Analyst.

“There is a historically strong relationship between carrier profits and vehicle demand. Once a quarter, we get to look at the publicly traded truckload carriers’ financial performance. The opening stanza of 2024 was notably bad for the very good carriers who make up the group. In Q1, profit margins collapsed to a 14-year low 2.6% (3.0% seasonally adjusted)”, he added. “While the profitability drop was in part seasonal, tractor capacity additions through 2023’s freight recession, and into 2024, have left carriers contending with below-operating-cost spot freight rates in an overcapacitized market. This in turn is holding down the group’s ability to boost contact rates, and thereby, profits.”

Vieth concluded, “We revisited our trailer forecasts based on these near-term considerations: carrier profits, overstocked trailer dealer inventories that are proving hard to move, a short and soft peak order season, and increasingly diminished backlogs.”

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