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What’s Ahead for the Trucking Industry in 2024? It was an interesting 2023 for the trucking logistics industry, between rising and dropping fuel prices, economic volatility, freight recessions, driver shortages, inflation battles and more. So what’s coming in 2024?
1. Continued Economic Concerns – 2023 saw the trucking industry in a freight recession, with more trucks and drivers than demand for fleet. Going into 2024, many experts are still raising alarms at low freight volumes. As a result, fleet managers should be prepared to explore rightsizing as the market continues to stabilize post-pandemic.
2. Supply Chain Disruptions and Resilience – Over the past year, supply chain weaknesses have begun to dissipate as the market for used vehicles and parts has started to correct. Moving into 2024, fleet managers should consider expanding their pool of suppliers and establishing solid contingency plans for delivery failures and unavailability, as well as utilizing technology and predictive analytics to foresee and avert any issues that may arise from disruptions.
3. Driver Recruitment Challenges – Finding new drivers from the upcoming generation of the workforce still presents a problem. The American Trucking Associations projected a shortage of more than 60,000 drivers for 2023, and that number increases to 82,000 in 2024.
4. Persistence of E-commerce – With the ongoing surge of e-commerce, fleets should continue to push for higher optimization in 2024. Extra emphasis should be placed on operational efficiency to adapt to market demands, including route optimization, delivery consolidation and improved real time tracking.
5. Electrification and Sustainability Goal Setting – Considering the EPA’s new standards to cut methane emissions in the trucking industry, 2024 is a good time for fleet managers to take a look at their sustainability plans. While electronic vehicles are still more costly than their competitors, there are plenty of other emissions cutting measures that can be considered, like better preventive maintenance measures or more detailed telematics tracking.
6. Tech Stack Expansion and Cybersecurity – To maximize efficiency, fleet managers should continue to refine their approach to fleet technology by embracing and integrating advanced technologies such as telematics, Internet of Things, and Artificial Intelligence. In addition, the more connected a fleet is, the more they should heighten their focus on cybersecurity to protect against potential breaches.
7. Geopolitical Impact – The continuing conflict between Russia and Ukraine, along with the new conflict in the Middle East between Israel and Palestine, are bound to continue to adversely affect the geopolitical landscape. There is a high chance these conflicts will impact oil pricing as well as global trade routes similar to what occurred in 2022 and 2023. As a result, fleet managers will need to stay abreast of issues as they develop and react accordingly.
Trucking Industry Expected to Invest in AI in 2024: Rising costs, economic instability, increases in fraud, safety concerns and a scarcity of skilled labor have plagued the physical economy over the past year, leading to losses in a number of industries, including trucking. As a result, leaders in the trucking industry are looking to artificial intelligence (AI) and other technology to turn the tide.
The top opportunities for improving physical operations over the next 12 months include updated technology and software, economic stability, supply chain improvements, increases in demand, and operational efficiencies. The five primary areas in which AI, one of the biggest components of updated technology, can provide the most value in the coming year include tracking assets and vehicles, more accurate decision-making, expense planning, reducing administrative work, and detecting fraud. Both construction and trucking see the top benefit of AI to be tracking assets and vehicles and optimizing utilization. Four out of five respondents to a recent survey conducted by Verizon Connect, a leader in delivering mobile delivery solutions and platforms, indicated they use at least one form of fleet technology, including GPS tracking solutions that can optimize routes that help drivers accomplish more each day, thereby reducing hiring needs. More than half of the respondents said GPS tracking solutions helped boost driver productivity, and 38% said such solutions improved preventive maintenance to keep vehicles roadworthy longer.
“Not all vehicles can be replaced, and not all labor gaps can be filled, but fleets can get more out of existing fleet, equipment, and labor assets by investing in smart solutions like asset tracking and EV technology,” said Peter Mitchell, senior vice president and general manager at Verizon Connect. “Fleet management technology now can be a bridge to hiring and vehicle replacement later by making fleets more efficient and profitable.” Leaders in the industry recognize that technology, particularly AI, is a game-changer for automating proactive decisions, enhancing safety, effectively addressing industry challenges, and presenting opportunities across this critical sector of our economy.
Trucking Bankruptcies Expected to Continue: The Yellow bankruptcy is widely known, but it isn’t the only carrier that’s closed its doors recently, and it won’t be the last. Industry bankruptcy experts say financial distress resulting from multiple factors has caused an uptick in bankruptcies among trucking and logistics companies of all sizes and some expect that trend to continue for the foreseeable future.
What’s driving the downfall of these companies is the longer-than-expected recovery from the pandemic. When the world reopened, consumer spending shifted from lockdown-driven purchases that caused a freight boom to more services-related spending. In addition to increased wages caused by employee shortages, rising fuel costs and inflation putting pressure on their carriers’ margins, the Federal Reserve kicked off historic tightening by increasing interest rates, putting even more pressure on supply chains. That pressure has brought about liquidity issues, which have caused debt service to go up, leading many to file for bankruptcy and restructure their debts. Bankruptcy filings seem to be the most prevalent among smaller trucking operations as a result of actions taken by Congress in 2019 to make the process of filing under Chapter 11 more streamlined and affordable.
Carriers who don’t have cash or resources readily available are going to find themselves in a difficult spot to be able to operate profitably, and those that are struggling now or are on the verge of struggling will just struggle further, leading to more bankruptcies. As a result, some carriers in distress are exploring all options, including hiring a good bankruptcy lawyer and a good accountant, and consulting with M&A advisors.
Even considering the pressure on margins, there is an upside. The risk in the marketplace is going to prompt a lot of leaders in the industry to activate strategic growth plans they may have been sitting on for a while had market conditions stayed the way they were. In doing so there is a good chance that many trucking and logistics companies will increase their capabilities and become much stronger.
Cummins to Pay $1.675 Billion Environmental Fine: Truck engine maker Cummins Inc. has agreed to pay a $1.675 billion fine to settle claims by regulators that they unlawfully altered hundreds of thousands of pickup truck engines to bypass emissions tests. According to the U.S. Justice Department, which announced the agreement in principle December 21, Cummins’ alleged actions violated the Clean Air Act, a federal law that requires car and engine manufacturers to comply with emission limits.
The fine would be the largest civil penalty imposed by the Justice Department under the Clean Air Act to date and the second-largest environmental penalty ever secured. The Justice Department accuses Cummins of installing devices which can bypass emissions controls on 630,000 2013-2019 Ram 2500 and 3500 pickup truck engines, as well as undisclosed auxiliary emission control devices on 330,000 2019-2023 Ram 2500 and 3500 pickup truck engines. Preliminary estimates suggest that these devices on some Cummins engines have caused them to produce thousands of tons of excess emissions of nitrogen oxides that can have adverse long-term health effects.
In a December 22 release, Cummins said it does not admit any wrongdoing, noting the company “has seen no evidence that anyone acted in bad faith.” Cummins added that it “cooperated fully” with regulators. The formal settlement, which will need court approval, will be made public as early as February.
Tough Economy at Top Of Trucking Industry Concerns: According to an annual survey recently published by the American Transportation Research Institute (ATRI), the sluggish U.S. economy has replaced record fuel costs as the trucking industry’s top concern in 2023 and heading into 2024. This change is largely the result of inflation, rising interest rates and high diesel prices, all of which exacerbated falling freight demand, making the economy a top-10 issue for both drivers and carriers. Truck parking, fuel prices, driver shortage, and driver pay rounded out the top five issues in the survey.
ATRI’s survey “thoroughly and accurately reflects the challenges we’ve faced this year,” Ruan Transportation Management Systems President and COO Dan Van Alstine said in a statement. “Costs were up and demand was down, all while we worked to navigate a number of workforce and regulatory issues,” said Van Alstine, who serves as American Trucking Associations chairman.
Carriers focused on the economy, driver shortage and lawsuit abuse reform, while drivers’ attention was most drawn to their compensation, parking and fuel prices. Each group shared concerns about emerging technologies such as autonomous and electric trucks. Zero-emission vehicles made the industrywide top-10 list for the first time this year. “Its emergence as a top industry concern is not a surprise given the new focus of state and federal agencies on very aggressive timelines for transitioning the nation’s vehicle fleet away from internal combustion engines,” ATRI said in its report.
Trends in Used Equipment Values
According to J. D. Power, depreciation relaxed as 2023 came to an end. Late-model Class 8 trucks with average or lower mileage for their age lost less than 4% of their value each month of the fourth quarter, and trucks with higher mileage have probably seen the worst of their devaluation.
The average pricing for three- to seven-year-old trucks for November 2023 was as follows:
Model year 2021: $64,105; up from $61,025 in October, but down from $87,000 in March
Model year 2020: $46,911; down from $52,473 in October and $64,317 in March
Model year 2019: $30,740; down from $31,565 in October and $50,411 in March
Model year 2018: $28,236; up from $26,189 in October, but down from $36,368 in March
Model year 2017: $19,189; up from $15,861 in October, but down from $25,456 in March
Four- to six-year-old trucks brought 3.9% less money than in October, and 40.2% less money than November 2022. During the first 11 months of 2023, late-model sleepers brought 41.6% less money than the same period of 2022. As of December 2023 monthly depreciation is down to 4.0%. Values for the newest model years available in the marketplace remain just under the strong pre-pandemic period of 2018 in nominal figures, or just over 20% less if adjusted for inflation.
According to J.D. Power, excess truck inventory will continue to filter through auction, wholesale and retail channels through the first half of 2024. Class 8 auction pricing is still roughly 20% higher than the lowest month of 2019 (in real figures), which was the weakest point pre-pandemic. The closer pricing gets to that level; the more depreciation should relax. Assuming some degree of pre-holiday demand followed by typically flat pricing in January 2024, J.D Power expects that it will not be until the second quarter of 2024 that depreciation returns to a historically typical level.