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After attending ACT Research's Market Vitals: The Current and Future Health of the Market Seminar 71 on August 21-22, 2024, Brett Lankford from Fetch Freight and Tim Denoyer from ACT Research had an in-depth discussion about the state of the Class 8 market, the role private fleets have played in out-of-cycle order volumes, current economic conditions, and what these trends mean for rate recovery and the eventual exit from the current truckload cycle.
Scroll down to read the full conversation between Brett and Tim.
1. Resilient Demand, But Stagnant Freight
Despite ongoing challenges, demand in the freight industry has shown surprising resilience, largely driven by strong consumer spending. However, the freight market itself has remained stagnant. One major reason for this is the rapid growth of private fleets. More companies are choosing to build and maintain their own fleets, which has led to a significant shift in volume away from the spot market. This trend is fueled by the more favorable cost structures of private fleets compared to traditional for-hire operators, enabling them to grow faster and more efficiently.
Another factor contributing to the imbalance is the declining cost of used trucks. With lower prices, owner-operators are finding it easier to re-enter the market, increasing capacity and further complicating the supply-demand dynamic. As a result, the market remains oversupplied, putting downward pressure on rates.
2. Truck Orders: Preparing for 2025
The conversation around truck orders highlights that the industry is at a critical juncture. Pricing is being finalized, and order books are expected to open soon for 2025. While sentiment remains cautious, this hesitation could actually be a positive sign for the spot market. A slowdown in manufacturing could help reduce excess capacity, leading to a more stable environment.
On the equipment side, inventory levels are rising, and the flow of new orders is beginning to slow. Truck manufacturers are approaching a turning point where they may need to scale back production. While this could be challenging for suppliers and OEMs, it may bring much-needed relief to freight rates. As more fleets confirm their plans, it’s becoming clear that a production slowdown is likely in the near future. This is part of the natural cycle of the freight market, and while it may present short-term hurdles, it sets the stage for a healthier market in 2025.
3. Emissions: A Growing Concern
Another topic gaining traction is emissions regulations. Although progress has been made, it remains slow, and the industry is preparing for these rules to once again become a central issue in the freight conversation. Compliance with stricter standards will likely add to operating costs, but it also signals a long-term shift toward sustainability in the sector.
4. A Long Downturn and Market Correction
The freight market, especially the for-hire segment, has been in a prolonged downturn. However, as the market adjusts, the fundamental forces of supply and demand are still at play. Excess capacity must be addressed, and this correction is essential for restoring balance. As supply gradually decreases, carriers and providers should see some relief, creating a more sustainable environment for growth in the coming years.
In conclusion, the freight market is navigating a tough period marked by stagnation and oversupply. Yet, with the industry’s resilience and strategic shifts in truck production and emissions policy, there is hope for a meaningful recovery in 2025. Stay tuned as we continue to monitor these key developments closely.
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