The North American freight market remains weak, muting demand for new Class 8 trucks and particularly trailers.

But costly EPA27 emissions standards are expected to increase the cost of a Class 8 truck by more than US$20,000, causing some to wonder if a pre-buy will breathe some life into truck orders in the months leading up to January 2027.

The freight market has been “stagnant” this year and isn’t expected to see much improvement until late next year, said Dan Moyer, senior analyst, commercial vehicles with FTR, speaking at the industry forecaster’s 2024 Transportation Conference.

Current order activity is at replacement levels, with fleets not looking to add capacity in a weak freight market. Class 8 orders are up 14% year to date, but that’s due to a strong start to the year. Orders have fizzled since, coming in below year-ago levels in the past few months, Moyer noted.

Meanwhile, a mirror plant in Mexico was hit by fire in April, resulting in some 10,000 “red tag” units – those that couldn’t be finished because the mirror plant supplied the entire industry.

“Starting in July, we saw factory shipments start ramping up again,” Moyer said.

OEMs have maintained build levels, drawing down backlogs and increasing inventories, mostly to avoid laying off workers who’ll be desperately needed in the event of an EPA27 pre-buy.

New truck lead times now sit at about 4.2 months, at the bottom end of the normal range of four to six months, and, said Moyer, “close to the point where OEMs will likely have to cut back on production.”

Retail sales of heavy trucks in North America are down 13% so far this year, compared to the same period last year while inventories have jumped 48%, partly due to the mirror plant fire and related red tag units that couldn’t be completed.

FTR is projecting North American Class 8 orders of 308,000 units this year, falling to 280,000 next year before a pre-buy could boost order activity to 352,000 in 2026. That’s a 22,000 unit shortfall this year compared to last. Moyer predicted fleets could pull forward as many as 23,800 orders in 2026 to get ahead of the costly emissions standards.

He anticipates this pre-buy activity will be seen in the second quarter of 2026.

“If it’s happening now, it’s not reflected in the market indicators yet,” he said.

Demand for trailers even weaker

Don’t call it a freight recession! FTR chairman Eric Starks said freight markets have been stagnant but fairly steady after a correction that came on the heels of major spike in demand post-Covid. “It’s mainly a rate recession,” he said of current conditions. “Freight has not been as horrible as people talk about.”

But when freight doesn’t pay, truckers are less likely to buy new trailers, and that reality is being reflected in FTR’s data, even as publicly traded truckload carriers have increased their trailer-to-truck ratios in the past year to about 3.9.

Starks said this increase in the trailer-to-truck ratio is likely an attempt to keep tractors utilized and drivers employed, by adopting more hook-and-drop loads.

Total trailer orders are at a four-year, near record low, down 20% year to date. Average orders totaled 16,600 units over the past 12 months but plunged to 6,000 last month, according to FTR.

It remains to be seen if order activity gets a bump this fall as manufacturers establish pricing and open their 2025 order books.

As per specific segments, reefer orders are up 18% year to date, but dry vans down 29% and flatbed down 9%. Liquid tanker trailer orders dropped 52% year to date, dry tank fell 81% and dump 25%.

“It’s not just one segment driving this,” Starks pointed out, also saying there are elevated cancellations.

Trailer production is down 21% year to date and a new trailer lead time is sitting at 5.5 months. The biggest red flag, however, is inventories.

Moyer said dry van inventories in the U.S. and Canada sit at about twice the level trailer makers deem “ideal.”

“There’s clearly excess inventory sitting out there at the dealership, which is going to create some pain points as they look through the next several quarters,” Starks said.

The trailer market is expected to come in at 234,000 units this year, down from 314,000 last year, but should climb to 260,000 next year before finally making it back to levels above 300,000 in 2027.

Moyer said fleets are more likely to spend limited capital budgets on power units than trailers, given the cost of the 2027 emissions standards.

Medium-duty inventories climbing

Medium-duty truck factory shipments are a bright spot for the commercial vehicle market. Moyer noted Classes 4-5 factory shipments are up 20% so far this year, while Classes 6-7 factory shipments are down slightly. Combined, they’re up 6% so far this year.

But many are sitting on dealer lots. Classes 4/5 inventories are up 33% year over year, a record high for this time period. The same holds true for Classes 6/7 trucks, with inventories up 33% and 40%, respectively.

Moyer said medium-duty truck inventories “are definitely a growing concern.”