Things Are Looking Great In The Trucking Industry
Spot rates and freight growth numbers are high. But the industry needs more trucks, resulting from a global microchip shortage affecting chip manufacturers and the trucking industry.
However, now is a great time to plan your next truck purchase.
A Little Background
In the springtime of 2021, Ford announced that production at five factories would cease until May 10, 2021, due to the global semiconductor shortage. It’s not just Ford; all truck manufacturers are struggling to find chips. Class eight manufacturers have thousands of half-built trucks parked at their facilities because no chips are available to finish production. A factoid for you:17 electronic chips makeup a big rig.
When the Covid pandemic hit us, and the economy took a downturn, truck manufacturers put their chip orders on hold. Meanwhile, chip manufacturers needed to keep up their sales by making other types of chips for medical devices, phones, etc. The silver lining for the trucking industry was that people stayed home quarantined, and they received stimulus checks from the government. They had some extra cash, and they purchased products on Amazon. So, people wanted their Amazon packages, but there were not enough trucks to make the necessary deliveries.
Then, truck manufacturers connected with the chip manufacturers and demanded chips for new truck production. Chip manufacturers realized that the new types of chips they were making were producing greater profits. Then, came the realization that making and selling less profitable truck chips would slow things down. A supply and demand situation hit the trucking industry. The class eight market surged. Some estimates say that more than 500,000 class eight trucks have been ordered in 2021. A great year was 180,000 trucks, so hitting the 500,000+ mark was incredible.
Soaring Rise in Truck Orders Not Hindered by Chip Shortage
Class eight truck orders were up 424% in March 2021, compared to March 2020. However, chip delays will continue into Q3, 2021 and onward. Used truck prices are increasing and will sell in more significant quantities. High inflation examples show that used car prices have risen by almost 30% over the last 12 months, ending in May 2021.
A Federal Reserve Bank of Cleveland study assessed that the chip shortage will delay truck production for maybe another six to nine months. The report also says that the demand for vehicles and chip production should both remain strong, and the current inflation rate should return to normal levels soon.
Semiconductor chips continue to be the top cause of supply chain delays limiting Class eight vehicle production. Truck production delays will make you wait at least a couple of weeks. Whether you’re a small fleet of medium-sized fleet or a large fleet, your ability to place an order, take delivery, trade-in your used vehicles, and run your new equipment is going to be a longer process.
Did you budget for truck repairs and maintenance? As new truck orders will make you wait, you will need to run your older trucks longer. You imagined giving up the truck at 450,000 miles, but now you may have to consider repair and maintenance costs for a truck running at 500,000 miles and more. Keep all this top of mind.
Place Orders Now for Trucks, Trailers, and Equipment
Now that semiconductor production is increasing again, you should place your orders for new trucks now. So even though we have hit the peak and are on the backside of the shortage, orders will take time as chip inventories recover.
Don Ake, VP of commercial vehicles for FTR Transportation Intelligence, said, “there’s a good chance that original equipment manufacturers start to open 2022 order boards in July. Whenever they do open those order boards up, we will probably get record order numbers.”
Order your new truck(s) now and be patient as we face long production lag times as the heightened demand for trucks.
Get in touch with Commercial Fleet Financing so our experts can help you on a lease option for a new truck. We deliver credit approvals in as little as two hours and funds in as little as 24 hours. We offer a range of programs, plus low payments and $0 down loan and lease options on a full spectrum of commercial trucks and construction equipment to help you expand your fleet.
About Commercial Fleet Financing, Inc.:
At Commercial Fleet Financing (CFF), our pros have given smart advice to fleet owners and owner-operators in the transportation, moving, towing or construction industries for more than two decades. With CFF, finding the right financing solutions is a phone call away and most borrowers secure commercial vehicle financing with ease. To talk directly with one of our finance pros and get started with credit approval in as little as two hours, CFF’s phone number is (469) 281-2962.