Truckers Want More Trucks than Industry Can Build

The trucking industry in the United States, which is at the heart of the country's struggle to move freight efficiently, is caught in its own constrained supply chain.

Source: WSJ | Published on May 9, 2022

Semi Truck Driver Making Conversation with Other Truck Drivers Through CB Radio.

Heavy-duty truck production is slowed by parts shortages that can't keep up with a large backlog of orders, according to industry executives, preventing fleets from replacing and adding trucks at a time when demand for shipping consumer goods and industrial materials is high. The scarcity of new trucks, combined with a driver shortage and rising fuel prices, is exacerbating the logistics problems that have been weighing on the US economy, pushing up delivery times and increasing transportation costs.

According to market analysts, shortages of parts, including semiconductor chips, forced truck manufacturers to cancel orders for thousands of vehicles they couldn't build late last year. According to Indiana-based market forecaster ACT Research Co., manufacturers have accepted approximately 55% fewer orders this year than in the first months of 2021. Due to limited access to new equipment, trucking companies are becoming more reliant on aging fleets.

According to Truline President Paul Truman, the trucking company turned down business due to a lack of trucks.

Paul Truman, president of Truline Corp., a 300-truck fleet based in Las Vegas, stated that he does not anticipate purchasing new trucks this year. Truline received 30 Peterbilt heavy-duty trucks in March that were ordered in February 2021 and were originally scheduled to arrive last August, he said. Truline, which primarily transports food and beverages, typically purchases at least 60 trucks per year to replace older, high-mileage trucks in its fleet.

Mr. Truman stated that Truline recently turned down a long-term commitment of 25 trucks and 400 trailers due to an inability to obtain more trucks. "It's difficult to grow when you don't have access to equipment," Mr. Truman said.

Heavy-duty truck production, the workhorse of the interstate trucking industry, was expected to rebound this year, according to market forecasters. According to ACT Research, Covid-19-related factory shutdowns reduced 2020 production, and parts shortages reduced last year's production to 264,470 vehicles. Annual production in North America has surpassed 300,000 during times of high demand, and the industry produced 344,560 trucks as recently as 2019.

ACT expects heavy-duty truck production to increase to 296,000 this year, down from a 300,000 estimate at the start of the year.

"Demand continues to outstrip the industry's ability to build trucks," ACT president Kenny Vieth said.

Truline, based in Las Vegas, typically purchases at least 60 trucks per year to replace older, high-mileage trucks in its fleet.

Truck manufacturers are also hesitant to push additional orders into 2023, with the order backlog already exceeding 250,000 trucks, roughly twice the normal level, according to ACT.

"We're not ready to fully open up the 2023 order board because of the uncertainties of parts supply and cost," said Preston Feight, CEO of Inc., the maker of Peterbilt and Kenworth trucks.

Paccar, based in Washington state, announced on April 26 that it delivered 10% fewer trucks in the United States and Canada during the first quarter compared to the same period last year. Sweden's, the maker of Volvo and Mack trucks, reported last month that truck orders in North America fell 73 percent year on year in the first quarter.

Trucking executives said that in the absence of new vehicles, they are putting more miles on older trucks, resulting in more frequent breakdowns, which contribute to delayed deliveries of products ranging from frozen chicken to construction materials.

Could Self-Driving Trucks Help Solve the Supply Chain Crisis?

As Aurora and Embark prepared to go public last year, WSJ's George Downs spoke with their CEOs about whether autonomous trucks could help solve the truck driver shortage in the United States.

Trucks that are typically cycled out of the fleet after 500,000 to 600,000 miles are now being kept on the road for an additional 200,000 to 300,000 miles, according to Doug Roberie, executive vice president of asset operations for the 550-truck fleet.

"Trucks have to be in the shop for a longer period of time," Mr. Roberie explained. "We need to spend more to keep them moving."

Older trucks with more miles consume more parts, making them vulnerable to some of the same parts shortages that are slowing down new-truck assembly, according to trucking companies. Paccar reported a 35% increase in first-quarter profit from parts over the same period last year.

Truline’s Repairs that used to take a day or two are now taking a month to complete due to long parts waits, according to Mr. Truman. He claims that about 5% of Truline's fleet is idle on any given day due to maintenance and repair work.

"If you can't get more trucks, you need every truck running," Mr. Truman said.

As trucking companies try to increase their capacity to haul more freight, the lack of new trucks is driving up demand for used ones. However, used inventories are shrinking as trucking companies keep their equipment for longer periods of time. Dealers reported that prices have risen, with used heavy-duty trucks selling for an average of $100,000, up from $100,000 a year ago.

According to Mike Clark, CEO of Dobbs Truck Group, a Peterbilt dealer in Memphis, the overheated used market is becoming increasingly risky. If the market weakens, dealers who purchase trucks at high prices may struggle to sell them at a profit.

"We've become a lot more cautious in the last few weeks," Mr. Clark said of used-truck purchases. "The used market can vanish overnight." That is the terror."

Despite recent drops in spot-market freight rates, trucking executives say demand for freight service remains strong, keeping them in the market for new trucks. According to trucking executives, new heavy-duty trucks are now priced between $140,000 and $175,000. They added that when truck availability improves again, they expect prices to rise by up to 20% to cover rising costs for steel, aluminum, semiconductor chips, tires, and other components.

According to Dave Wozniak Jr., vice president of M.C. VanKampen Trucking Inc., which is based in Grand Rapids, Mich. and operates a fleet of 145 trucks, not knowing how much new trucks will cost makes it difficult for trucking companies to give customers price quotes for freight service next year.

"The next order will be eye-opening," Mr. Wozniak predicted.