In general, the trailer market is expected to maintain a smooth trend during the next five years (through 2027), compared to the wild swings, with a prebuy and payback cycle, anticipated for the Class 8 market.
Since dry vans are the largest category, a discussion of that segment might be in order.
After massive growth through the 1990s, the US dry van fleet posted only modest growth in the early 2000s, before plateauing in 2006/2007 at 1.83 million units. Unpacking that sentence, there were three drivers of the sharp population run-up in the 1990s, and an asterisk, which includes:
- National adoption of the 53’ trailer standard
- The move from Fiberglass-Reinforced Plastic (FRP) to aluminum plate and composite sidewalls
- The advent of just-in-time (JIT) inventory management, which triggered a sharp run up in trailer tractor ratios
While a transient factor, we would add aggressive original equipment manufacturer (OEM) market share wars into the end of the 1990s. When combined with the preceding three factors, that competitive fracas triggered a significant demand-pull forward that was not dissimilar to what occurred simultaneously in the US Class 8 market.
The flattening in the market across the first decade of the new century was attributable to two factors. First was the previously mentioned market overcapacity into 2000. Second was the advent of electronic trailer tracking technology, which allowed for fleet rationalization and meaningfully lower van trailer-to-tractor ratios.
Additionally, for dry vans, a trailer-to-tractor ratio is another consideration for future demand. As illustrated, following the introduction of trailer tracking devices in the early 2000s, the ratio has remained lower versus the 1990s. Every basis point of change is equal to around 2,200 units of population.
Looking forward, our model anticipates a rise in the ratio in the medium term, from 2.6:1 to 2.9:1. The rise is due to increased warehousing resulting from e-commerce growth that increases drop-and-hook type operations, as well as elevated tractor retirements. On the flip-side, tracking technology and packaging productivity continue to evolve, arguing for increased utilization levels which would dampen the ratio over the longer term from reaching even higher ratios.