Business shutdowns imposed to slow the spread of the coronavirus have virtually frozen demand for new trucks and equipment in the freight sector, but according to fleet management and transportation provider Ryder System Inc., the market for used commercial vehicles has continued in many states at a slow and steady pace.
Those results may reveal one way the pandemic has changed the logistics equipment market, in the face of brutal business challenges. A recent model of business demand forecasted 2021 as a “transition year” for the North American commercial vehicle market, with global economies not showing a meaningful rebound from Covid-19’s negative impacts until 2022.
Another measure of that recession is the collapse in demand for freight trailers, which typically last for eight to 10 years before being worn down by duty carrying tons of weight over hundreds of thousands of miles. Demand for new trailer components has now tumbled to a “massive retrenchment” in production levels, after riding so high in the last year years that providers were challenged to keep up with demand, a report from Columbus, Indiana-based market analysis firm ACT Research Co. said. “While there was no indication of any widespread Covid-19 lockdown driven shutdowns at trailer OEMs in the past quarter, the dramatic cessation of fleet investment has caused OEMs to quickly reassess their production volumes and staffing needs,” Frank Maly, Director–CV Transportation Analysis and Research at ACT Research, said in the report. “Higher freight demand will eventually challenge fleet capacity, and drive an improvement in freight rates, which will help build fleet confidence and generate the desired combination of equipment need and ability to pay. However, the path to get to that point likely will be arduous.”
That was similar to an assessment by Bloomington, Indiana-based industry research firm FTR Transportation Intelligence, which found that preliminary net trailer orders for April sunk to their lowest level in the modern era (since 1990), coming in at just 300 units. April order activity was down 95% compared to March and down 98% compared to April last year. “Fleets remain in a severe wait-and-see posture until they can evaluate the damage done to the freight markets from the pandemic,” Don Ake, FTR’s vice president of commercial vehicles, said in a release. “Since the recovery from the economic crisis is highly dependent on the status of the health crisis, there is a huge amount of uncertainty in the trailer market. Buying activity appears to be on hold until the fleets can see a clear path forward. The bigger fleets will resume replacing old trailers as soon as they see the economic restrictions lifted and freight growing again.”
Despite that historic downturn in demand for fleet equipment, Miami-based Ryder says it has logged decent sales of its used vehicles, according to Eugene Tangney, Ryder’s vice president of global used vehicle sales. “Usually March and April are the beginning of the big months; it’s Spring, people are waking up and making decisions. So compared to history, certainly it was not a good month, but we were very happy with the volume we sold and the activity we saw,” Tangney said. Those trucks are typically 5-7 years old, as opposed to the much newer stock sold by dealers carrying trucks that are brand-new or ranging up to 24 or 36 months old.
While Ryder did not share specific sales totals, the company said its sales happened nationwide, with "a lot of activity" in the Southeast and Western regions, while the Northeast U.S. has the quietest demand. Those numbers are likely in accordance with regional differences in the extent of social distancing policies and travel bans levied to slow the spread of Covid-19.
Much of that demand is coming from first-time buyers, Tangney said. “There have been furloughs and layoffs, but there’s a group of people who are making a decision, saying ‘I’m going to get a truck and go into business myself’. So our sales of trucks, tractors, and tractor-trailers in the month of April was better than I thought it was going to be.”
To encourage that slow and steady demand, Ryder last month launched a free delivery program for all vehicle classes in its catalog, ranging from in-town delivery trucks to mid-sized regional trucks or tractor-trailers. The company also offers a package of financing terms known as its “Ryder Relief Program,” including generous financing options, lower interest rates, and deferred payments.
