Over the last couple of years, the trucking industry has experienced some highs and lows. In 2019, spot market pricing has been a struggle for the transportation industry. There has also been a decline in Class 8 builds. Conversely, an upturn is expected as the retail industry starts to boom in 2020. Moreover, Class 7 medium-duty production numbers are anticipated to surge in the coming year. Owners and operators can anticipate the following prevalent trucking industry trends for this calendar year.
One of the biggest factors that will impact a trucking company’s bottom line is the new ELD regulations. The Federal Motor Carrier Safety Administration mandated that by December 2019, all commercial motor trucks must have an electronic logging device (ELD) installed. Although the hours of service rules have not been changed, the ELD paves the way for more enforcement. To avoid penalties, fleet operators must have a compliant ELD installed and a list of procedures for the driver to follow in case of malfunctions. The trucking industry can anticipate the following challenges as the mandate takes effect:
Overcrowding at rest stops as truck drivers must follow the exact break guidelines
Warnings and fines are likely if drivers are not abiding by the new regulations
Delivery delays with possible decline in client satisfaction
As a goal for 2020, companies must strategize solutions to meet customer demands as they follow the ELD regulations.
Return to Freight Growth
The first half of 2020 may be difficult as companies adjust to the new ELD regulations. Smaller companies may look into mergers as a way to survive the market challenges. With trucking companies pulling their resources, they have a better chance of survival. If mergers don’t occur, companies may go bankrupt and need to shutter down operations. Another tactic that may be required is trucking companies charging less as a survival technique. Additionally, less trucks will be purchased for a while in order to make money from current fleets.
The good news is by the second half of 2020, market conditions are set to improve. As things turn for the better, companies can again increase prices to reflect fair market value. Another positive thing that will impact trucking companies is the evolvement of the e-commerce industry. As e-commerce becomes more popular than ever, online stores need trucking companies to move their products. Once the shift occurs, companies can invest in expanding their fleets with new trucks.
Spot rates have been on a decline throughout 2019. Only in the month of September did a rebound occur. Load to truck ratios surged with load postings going up by 29 percent. There was also a surge in pre-shipping during 2019 as companies struggled to get ahead of the September 1st tariff deadline. The U.S. trade industry locked in 15 percent of tariffs on imported Chinese goods. Spot rates through the end of September were:
$1.84 per mile for vans
$2.19 per mile for flatbeds
$2.17 per mile for reefers
In January of 2020, DAT Solutions provided the following spot rates:
$1.94 per mile for vans
$2.15 per mile for flatbeds
$2.32 per mile for reefers
The cost of fuel is always set to have an impact on the vitality of the trucking industry. Fuel is the major expense that any company incurs throughout the fiscal year. In 2020, industry experts anticipate the cost of diesel fuel surging to $0.20 more per gallon. To combat the increased prices, trucking companies will become more proactive in looking at alternative fuel sources. When buying new trucks for a fleet, owners will start to look at electric-powered vehicles and trucks that run on alternative fuel sources.
Data analysis will continue to be more incorporated into operating a fleet. With tracking tools, owners will review performance statistics for drivers and trucks. Issues can be addressed in real-time and serious problems are preventable. Through data analysis, routes are adjusted sooner to maximum efficiency. Companies relying on big data have demonstrated higher rates of driver retention and safer driving records. Big data is also a tool for asset management. As an example, analyzing the service records of the current fleet helps with better procurement decisions.
Another innovation is improvements in dispatch software. With better dispatch software programs, communication between drivers and dispatchers are optimized. Many companies have started to use programs like the type from McLeod. McLeod has functions for dispatch, drivers, sales team members, and the back office. The software allows for management of trailer swaps, team loads, and best driver recommendations. The program receives ELD information and transmits the data to dispatch and suggests the best driver for a run. Also, the software prevents a dispatcher from assigning a load if a driver wouldn’t be able to complete the run on time.
Central Hub Locations
Trucking companies are beginning to change production locations for 2020. Texas is still likely to remain the top choice for flatbed operations. However, Illinois and Ohio are likely to increase in popularity as new production spots. Companies located on the east coast or west coast may make the move to the middle states as a cost-saving tactic.
New Truck Trends
Most companies buy new trucks when profits are in the black and there is an increase in the number of loads that need hauling. This may lead to a problem with overcapacity when a slowdown in orders start. Class 8 net orders were down approximately 64 percent between 2018 and 2019. Class 7 trucks, which are typically referred to as medium-duty vehicles, experienced less of a decline in 2019. Net orders only dropped by 19 percent. Economic forecasters don’t blame the decline of Class 8 trucks as a sign of a recession. One of the key factors in fewer Class 8 orders is due to environmental concerns. Diesel engines are not considered a clean energy source. Emissions regulations are pushing both diesel engine manufacturers and Class 8 truck producers to offer more efficient and cleaner engines. The production of large haulers may continue to decline throughout 2020. The good news is medium-duty Class 5 to Class 7 trucks will have significant production growth.
Despite slowing trends, Class 8 truck manufacturers are continually offering new models with innovative features. A few new truck model highlights are:
Cascadia: Freightliner is making enhancements to the Cascadia to improve connectivity and driver safety. An active brake assist feature detects both pedestrians and objects in the road and will employ full emergency braking if required. Side guard assist and lane departure protection have been improved to prevent accidents. A new aerodynamic design and updated powertrain improves the truck’s fuel efficiency by more than 35 percent.
W990: Kenworth Trucks have improved the design of the W900 to offer companies, the upgraded 2020 W990. An advanced vehicle electronic control unit is included for increased engine-set speed adjustments, reduced physical wiring, and driver assistive technologies. Driver comfort has also been enhanced with the latest release from Kenworth Trucks. Options include all-black interiors, enhanced sleeping quarters, and a home away from home design.
Pinnacle: Mack has released several new models for 2020, including the Pinnacle. Pinnacle is Mack’s most rugged truck with many likening it to a true workhorse. An advanced chassis frame provides a high-level of support even when hauling the heaviest of loads. Ground clearance has been adjusted to allow for more off the highway driving. A newly designed instrument panel was designed to combat issues like driver fatigue.
Model 579: Peterbilt has focused heavily on updating its Model 579’s electrical systems and engine for 2020. Updates are centered on improved fuel efficiency. The powertrain has also been updated for better fuel economy. Additional safety locks and advanced diagnostic tools were other upgrades made to the Model 579.
Although new Class 8 truck costs will remain consistent between 2019 and 2020, used Class 8 truck prices will decrease. Prices are expected to drop by 7 percent with an average around $44,000. New Class 8 trucks are expected to have an average cost of $120,000 going into the new year.
Despite the potential for continued slow growth in 2020 for the trucking industry, owners can still be optimistic. Better fuel efficiency, lower used truck pricing points, and more data analytic tools are just a few examples of cost-saving solutions that will help companies survive the economic challenges in 2020.