Truck tractor pricing hits record levels
We launched our Inside Edge podcast series earlier this year, welcoming subject matter experts from the construction, transportation, and agricultural industries to discuss everything from labor issues, supply chain challenges, pricing and demand metrics, and more.
We wanted to sit down with our guests to learn more about them and the industries they specialize in. Last week we had a chat with transportation expert Steve Tam of ACT Research.
What do you do & how did you get into the transportation industry?
I am Vice President of ACT Research, which specializes in understanding, analyzing, and forecasting all aspects of the transportation industry. I have loved being a part of the transportation industry for 20+ years.
My first position in the industry came when I got a call from a headhunter who was looking to fill an internal audit position at Cummins. This new job required a lot of analytical work, which interested me, plus the position was closer to home, which was great since my wife and I had just recently had our first child. I learned a ton in my five years at Cummins. A downturn in the industry led to a great opportunity to join ACT Research, focusing on market research and analysis, and forecasting for the transportation industry. Joining ACT Research wasn’t a far leap from my work at Cummins, but it allowed me to deepen my knowledge and become a true subject matter expert. I have to know just about everything going on in the transportation industry and I love digging into the details.
Used truck prices have reached record levels in 2021, why?
It may seem simple, but the answer is basic supply and demand.
I imagine most of your customers are aware that on the new truck side of the business, manufacturers are very challenged to produce new units because of the numerous supply chain constraints we are experiencing this year. This has also resulted in the slowdown of trucks entering the secondary market, as transportation companies hold on longer to units. As a result, we have a supply shortage. Simultaneously, freight markets and spot rates have been robust in 2021, creating record demand for trucks.
When you've got tight supply and strong demand, what happens? Prices increase.
In my 20 years in the transportation industry, I’ve never seen supply so constrained. Consequently, we’ve never seen used truck prices as high as they are today
What exactly are the supply chain issues that are slowing down production of new trucks?
When you build a truck, you have to have all the parts. Right now, there is a global shortage of semiconductor chips and there are approximately 35 different parts of a Class 8 truck that require a semiconductor. So, if you can’t get those semiconductors you can’t build the truck.
But it’s not just semiconductors. There are literally scores of other scarce parts. It’s everything from basic steel needed to make frame rails and suspensions, to rubber for tires, hoses, and belts. Foam seat cushions and mattresses for sleepers were in short supply for a while. Fifth wheels, wiring harnesses, mirrors, visors…there’s almost nothing in the cab of a Class 8 truck that we haven’t seen shortages of this year.
Looking ahead, what’s your expectations for the transportation industry in 2022?
Looking ahead to next year, I think we at ACT Research are pretty bullish on the marketplace. 2021 has seen record high freight rates and publicly traded trucking companies are reporting record earnings and profit. When truckers make money, they usually buy new equipment and invest in their businesses. While supply chain issues are likely to continue late in to 2022, we expect challenges to lessen as we go through the year. I think we could see new Class 8 production increase 15-20% from where we finish 2021.
Where can people learn more from you and ACT Research?
Visit our website at actresearch.net! We have a series of reports that look at the current industry, so you know what's going on right now. We also provide forecasting, market demand metrics, and a whole host of other data to help folks get their heads around what's going on in this crazy market
Learn more about the transportation industry: