The convergence of continued strong build rates, a fading U.S. tractor sales trend, and early in the year sales seasonality risk a Class 8 inventory surge in Q1. ACT Research points out some of that dynamic can already be seen with more inventory accumulated the past two months ending November—4,300 units—than the 3,300 units accrued across the preceding 12 months, as published in the latest release of the North American Commercial Vehicle OUTLOOK.

“Something we marveled at, as late as this September, was the close correlation between build and sales that had kept Class 8 inventory levels, both nominal and relative, near perfectly positioned very late into the cycle,” said Kenny Vieth, ACT’s President and Senior Analyst. “Increasingly, with inventories already rising and the sales calendar becoming unfriendly in early 2024, the data suggest this cycle will not provide an, it’s different this time outcome, with more inventory accrued in the last two months than the preceding twelve months.”

He added, “If there is a silver lining, we assume that much of the end-of-2023 inventory build occurred in California because of expensive and complex CARB regulations that went into effect in January.”

Vieth concluded, “The Class 8 forecast has anticipated a production slowdown beginning in Q1. As any significant inventory stockpiling won’t occur until January and February, we are probably early in our call for build rate cuts sooner. The U.S. Class 8 tractor sales rate has been trending lower since Q2’23, and even in good markets, January and February are far and away the worst months of the year for retail sales.”