Class 8 Pricing is Still Holding Up
As one of the most historically-significant months in recent history draws to a close, lets look at how market conditions were affected by the massive economic and social upheaval.
First, consumer stockpiling kept freight volumes high throughout the month, supporting demand for used trucks. Looking at auction activity through the first half of the month, sales volume and pricing performed better than expected. Volume will probably end up similar to February, which was the last pre-virus month. We certainly didn’t expect that to be the case earlier this month. Pricing will probably end up roughly 10% lower, which we consider pretty good given the uncertainty. Lower-mileage trucks continued to bring decent money, which suggests underlying market dynamics haven’t changed too much.
Looking forward, stockpiling will eventually diminish, and that’s when the full impact of widespread business closures will be felt. The virus infection rate will continue to increase exponentially, and the effects of the ongoing partial economic shutdown will be felt through the 2nd quarter. Given this observation, we agree with analysts who predict the recovery to begin in the 3rd quarter.
One wild card impacting the new and used truck market is truck factory closures. Ceasing production for 2 weeks (or more) should be a mild assist to new truck inventory levels, although we don’t see much of a spillover effect to the used truck market. Cutting off the supply of new trucks will basically right-size production to the deteriorating demand we expect in the 2nd quarter.
Given the better-than-expected auction environment, we expect March retail data to look decent when we receive it early next month. We’ll publish final March auction and retail numbers in mid-April. Stay tuned.