I was asked recently to put together a list of market trends in trucking for someone who’s unfamiliar with the industry. It’s not often we take the time to pull back from the fairly narrow perspective of our daily work to make something we know so well understandable to someone coming from a completely different business. The results were as instructive for me as I hope they were for my intended audience. Sometimes it’s quite useful to see the business you’ve dedicated yourself to through the eyes of the rest of the business world. Here’s what I learned.
First, trucking is facing a large number of serious issues, and almost all of them are intertwined. I started with the rapidly escalating cost and complexity of trucks themselves. Since 2007, heavy-duty truck prices have climbed $25,000 or more as electronic controls and active aftertreatment systems have been introduced to meet emissions standards. Those higher costs, combined with the economic downturn, pushed fleets to extend trade cycles and run their businesses with some of the highest average-age trucks we’ve ever seen. On top of the high initial costs, they’ve also raised operating costs with lower fuel economy and more downtime to repair the complex aftertreatment systems. With trained technicians already in short supply, the more complex technologies just exacerbated the problem of finding properly trained people to handle those new problems.
Much of the interest in natural gas as a truck fuel is driven by the promise of lowering those higher operating costs through a combination of much lower fuel costs and simpler trucks not required to carry DPF, SCR or other expensive, complex aftertreatment systems. Similarly, urban fleets are intrigued by electric vehicles with ranges that suit their applications, and diesel-electric hybrids are looking good again for medium-duty truck P&D duties.
The second major market trend for trucking is the widely acknowledged shortage of drivers. With few new entrants, the aging pool of current drivers is shrinking from natural causes. And that shrinking is only accelerated by CSA recordkeeping, which brings some real accountability for poor driving and safety records. Changes to hours-of-service rules further dilute the lure of driving a truck since they cut productivity. Based on our current pay-by-the-mile model, this has also resulted in further reducing already low driver pay.
With equipment expensive and finding qualified drivers a constant struggle, it’s not surprising that fleets are being very conservative about expanding current operations, operations that typically shrank 10 to 15% during the recession. Our recovery is painfully slow, so it’s not always clear, but with so many older trucks and tepid new-truck sales, trucking remains on the edge of real capacity constraint. And it will only get worse, which may actually be good news. The American Trucking Assns.’ recent industry forecast predicts that truck freight volume will grow 2% a year until 2024, and with fleets dragging their heels on expansion, the naturally tightening capacity will deliver freight revenue growth of 4.7% a year over that same period. The only transport mode with faster freight growth will be rail intermodal, growing its volumes at 4.9% a year over the next decade. But to put that into perspective, intermodal is forecast to handle only 1.7% of freight by 2024, compared to 70.8% for trucks.
I outlined a fourth emerging market trend for my non-trucking audience, one that offers fleets realistic hope that they can not only weather these other three trends, but profit from them and thrive. But that’s worthy of an entire column by itself, so more on that next month.
