US Trailer Demand Defies Economic Downturn
Wabash National can’t build dry-van and refrigerated trailers fast enough to meet US demand, so the equipment manufacturer is expanding its plant in Lafayette, Indiana, to turn out more dry-van trailers starting in the first quarter and is expanding production of refrigerated trailers as well.
The expanded use of drop-and-hook trailer pools by shippers, carriers, and third-party brokers is driving demand for the traditional dry-van 53-foot trailer. That rolling box is moving to the forefront of supply chain strategies, alongside container chassis, instead of just being “trailing equipment.”
Trailers are also increasingly expensive. New dry-van 53-foot trailers can cost between $50,000 and $60,000, and even used trailers can cost $40,000 and more, depending on the make and model year.
Net US trailer orders in September rose 47 percent from August to 26,086 units, as trailer manufacturers began accepting 2023 orders. However, net orders were down 8 percent from a year ago, according to ACT Research. Incomplete trailers that were “red-tagged” at factory lots are finally moving, ACT said.
“While manufacturers continue to wrestle with rolling supply chain disruptions, as well as challenges on the labor front, tangible improvements are being made” in the ability to produce and deliver trailers, Jennifer McNealy, ACT’s director of CV market research and publications, said in a statement Thursday.
Wabash increased new trailers shipped by 7.3 percent year over year in the third quarter, after a 17.9 percent gain in the second quarter. However, the 13,365 trailers shipped last quarter were still 2.4 percent below the 13,700 trailers Wabash shipped in the third quarter of pre-pandemic 2019.
That’s another sign trailer makers, similar to most manufacturers, are still dealing with the supply chain disruptions mentioned by ACT’s McNealy, constraining new trailer supply.
Wabash is confident it will grow, recession or not. “[With] demand coming from digital brokers, power-only solutions and the growth of trailer pools more generally, we continue to feel very confident in our longer-term financial targets into 2025,” Brent Yeagy, president and CEO, said Wednesday.
“Implied demand for our products is so far above industry capacity that even if implied demand is reduced by a macro event, we suspect that it will result in what we would consider a good year for the industry,” Yeagy told Wall Street analysts in an earnings call transcribed by Seeking Alpha. He sees a strong order pipeline in 2023, 2024, and beyond.
The manufacturer’s order backlog hit $2.3 billion in the third quarter, a 20 percent increase year over year and a third-quarter record for the company.
Extending the warehouse
Truckload and less-than-truckload carriers are stocking up on trailers for use in trailer pools. With storage space tight across the US, trailers are also becoming an extension of the warehouse. And disruption that reduces trailer turns only increases demand for additional trailers.
By: William B Cassidy/ JOC