With the economy heating up, demand for medium and heavy-duty trucks is soaring, driving prices higher. However, production is being constrained due to ongoing supply chain disruptions. Over the last several months, nearly every major manufacturer of these vehicles has reported significant challenges sourcing critical components. Companies like Peterbilt, Kenworth, Volvo, Freightliner, Mack, and International have all been affected. These companies have had to halt production temporarily because they lacked essential parts needed for assembly.
As of mid-September, the industry still faces substantial supply chain hurdles, with experts predicting that component shortages might persist well into 2022. This limited supply, coupled with high demand, is pushing both new and used truck prices upward—a trend already seen in the automotive sector. Higher truck prices will inevitably lead to increased freight charges, which could fuel inflationary pressures across consumer goods.
ACT Research, a leading authority on Class 8 truck orders, sales, and forecasting, recently revised its production outlook downward. This adjustment reflects ongoing struggles within the truck manufacturing sector to manage supply chain constraints. "The narrative has shifted dramatically from one of abundance to scarcity," remarked Kenny Vieth, ACT’s president and senior analyst. He highlighted that while semiconductors often get the spotlight, various other parts are equally impacted by factors such as pandemic-related disruptions, lingering steel tariffs, and even the February storm that disrupted Texas and parts of the U.S. plastics industry.
Class 8 orders far exceed current build rates due to part shortages. In July, the industry should have produced around 30,000 Class 8 trucks based on orders but managed only 14,820 units. This discrepancy highlights how demand exceeds supply in the heavy-duty truck market. Meanwhile, the medium-duty segment remains relatively stable thanks to manufacturers reallocating scarce resources between different classes of vehicles.
It’s worth noting that while semiconductors are a key bottleneck, ACT Research points out that constraints extend beyond just chips. A wide range of components are currently facing delays, complicating efforts to meet growing demand.
Source: ACT Research
Basic economics explains why truck prices are rising: when supply is restricted and demand is robust, prices go up. Medium and heavy-duty trucks are experiencing heightened demand thanks to a booming economy and high truckload freight rates. Price hikes aren’t confined to trucking alone; other modes of transport, including container shipping, are witnessing steep increases in pricing as well.
Source: Bureau of Labor Statistics
Component shortages are affecting a broad spectrum of industries, from aviation to agricultural and construction equipment. Used car prices have surged to record highs due to widely publicized semiconductor shortages.
Source: Manheim Used Vehicle Price Index
Earlier this year, Intel CEO Pat Gelsinger stated that the semiconductor shortage could last well beyond 2022. Building semiconductor facilities is costly and takes considerable time to plan, construct, and ramp up operations. Demand for semiconductors typically fluctuates more drastically than broader economic trends—when GDP grows by 3%, semiconductor growth tends to exceed that figure, and vice versa.
"Imagine you're an automaker looking to secure more chips. You're told the lead time is a year. How many would you order? Would you diversify your suppliers? Absolutely," said Willy Shih, a Harvard Business School professor specializing in technology and manufacturing.
Semiconductor demand oscillates between booms and busts, and this cycle will likely mirror that pattern. During tight supply conditions, buyers tend to bulk up on strategic inventories, aiming for six months’ worth of supply rather than the usual two months. This behavior intensifies the existing supply crunch.
Eventually, supply will catch up to demand or demand will moderate (usually due to a broader economic downturn), leading to normalized market conditions. When this happens, demand can plummet rapidly because many buyers hold excess inventories. Semiconductor manufacturers are acutely aware of this cyclical nature, which explains why they are cautious about expanding capacity during peak periods.
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ACT Research Adjusts Its Production Forecast Amid Supply Chain Issues
Takeaway: Historically, Class 8 heavy-duty truck production tracks closely with industry net orders. Recently, however, the gap between orders and production has reached unprecedented levels—orders remain strong, yet production lags significantly behind.
New and Used Truck Prices Set to Keep Climbing
Takeaway: Data from the Bureau of Labor Statistics indicate that long-distance truckload prices are climbing at their fastest pace in over 15 years. Ultimately, rising transportation costs filter into consumer goods prices, contributing to overall inflation.
Takeaway: Used vehicle prices are climbing at their steepest rate since 1995. Anecdotally, a friend of Equipment Radar recently sold their used car for $500 more than they paid three years ago.
Semiconductor Cycles Are Prone to Volatility—This One Won’t Be Any Different
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ACT Research: Used truck prices rise as secondary market inventory trickles
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New & Used Medium & Heavy-Duty Truck Prices Will Likely Continue Rising Amid Components Shortages