European trailer market Lead-Times index, presented by TIP

It has been one “roller coaster” of a year for the transportation industry. Since 2021, the European trailer industry has been influenced by major external events. Trailer prices are the highest they have ever been in the last 25 years and we are dealing with a diseconomy of scale where the higher the demand is, the higher the prices are.

What happened to the industry? What is the status of the market? What are the forecasts for 2022?

To better understand the European trailer market, for the first time, we are revealing our data as industry insiders: the European Lead-Times index (ELT), presented by TIP.

What is the ELT index, presented by TIP?

The European Lead-Times index provides a holistic analysis on market forecast. It offers an up-to-date statistical measure of the lead-times trend, to help us better anticipate the future.

It is calculated as a function of the market and market trends. The market average is 50; a higher figure indicates that the average time between ordering the equipment and receiving it is higher, and conversely, a lower figure indicates that the average time is lower.

TIP’s ELT index from April 2018 to April 2022

Exponential growth of raw material cost and delivery deadlines since 2021

Trailer manufacturers have encountered some hurdles since 2021. We distinguish three key periods where there was a real peak of growth: February 2021, July 2021 and February 2022. These separate events demonstrate the exact moment where prices significantly increased. To understand this increase, we need to take a closer look at the various events that marked the industry at that time.

February 2021: the beginning of the diseconomy of scale

The above index underlines a first peak of growth in February 2021, which corresponds with the announcement regarding subsidies for new trailers by the German government.

In total, the German government had a budget of 550 million euros allocated for this subsidy, for which the deadline for applications was 15th of June 2021. However, to be able to benefit from this subsidy, it was necessary for the trailers to be registered before December the 31st (later extended to March 2022).

As a result, demand from German manufacturers rose considerably, which had consequences all over Europe. To be able to apply for the subsidy on time, customers turned to other European manufacturers that had more capacity at that time.

This sudden growing demand marked the beginning of the diseconomy of scale: the higher the demand is, the higher the prices are.

July 2021: the introduction of the Raw Material Index clause by the first OEM

The ELT index shows a second peak of growth, which began when market demand was greater than the capacity of the manufacturers.

Because of the high market demand, trailer manufacturers expanded their business to have sufficient capacity to meet the expectations. This increase in production has, in turn, led to raw materials shortages and a rise of prices. Inevitably, manufacturers have had to increase their prices to compensate for this rise in raw material prices.

Since 2021, the price of these key components has kept on rising. In a period of 12 months, the price of aluminum increased by 90% and steel by 100%.
Thus, in July 2021 an indexation clause for raw materials was introduced for the first time to secure the manufacturer's business. This clause led to a reduction in orders for this manufacturer, while the others decided to continue to increase their delivery times.

February 2022: the supply shortage increased by the Ukraine-Russia war

Adding to this, the tragic war between Ukraine and Russia is also massively contributing to the shortages of all kinds.

In addition to the shortage of aluminum, steel and EBS systems, the industry is now facing a shortage in wood, as this component mainly comes from Ukraine. This shortage is highly affecting trailer manufacturers because wood is used in all kinds of trailers, and Russia used to be a major exporter of wood. However, most companies have completely stopped sourcing from Russia. Both the ban on Russian exports and the disruption of Ukrainian factories has led to a massive shortage of materials.

What can we expect for the coming months?

With this rise in delivery times and costs, businesses will need to make the most of their available resources. All manufacturers are facing significant disruptions to their business due to a lack of anticipation of these supply chain issues. Some of them have rescheduled their production, or even stopped releasing quotes for 2023 supply.

“In the coming months, we expect the lead-times to stabilize but given the uncertain market dynamics we are operating in, we do anticipate continued challenges in the supply chain, causing supply delays and further price volatility” says Arjen Kraaij, Deputy CEO at TIP.

To meet the growing demand, TIP has already placed “a considerable number of orders with manufacturers for delivery in 2022 and 2023, to secure the fleet of our customers. Additionally, we tailor our used assets sales to create extra capacity and allow more equipment availability”. explains TIP’s Deputy CEO. “For us, it is our vision to help our customers to achieve their targets, goals and ambitions.”

Anticipate your needs with TIP

TIP constantly watches the evolving market closely to understand, anticipate and adapt accordingly to these challenges. The ELT Index is a great example of one of the tools that is used.

“Our customers can rely on us to help them and meet their needs in securing access to transport capacity. We will be receiving many vehicles to add to our fleet and will be glad to make them available for customers.” explains Arjen Kraaij. “In addition to this extra order, we support our customers by refurbishing their fleet to extend and create a longer life for these used assets.”. 

With over 50 years’ experience of servicing its own extensive trailer fleet, TIP is one of the leading providers of both equipment and services within Europe and Canada. We specialise in providing the transportation and logistics sector with leasing, rental, maintenance and repairs through a wide selection of trailer equipment.

Whether you are already a TIP customer or not, TIP offers its services from more than 120 locations spread over 18 countries in Europe and Canada, with experts on hand to maintain all asset types, through on-site maintenance and roadside assistance, together with advanced telematics programmes for predictive maintenance.

TIP also offers a wide range of high quality 2nd-hand trailers and trucks across Europe and Canada.

Contact your closest TIP branch now to keep your fleet going: https://www.tip-group.com/en/contact-us