IronTrax Shares Trucking Industry Outlook, Sector Insights and Trends

IronTrax released a report that focuses on several topics pertaining to the trucking industry, including trends to watch in 2024, industry opposition to the new rule on electronic trucks, actions taken by President Joseph Biden to delay the restocking of strategic oil reserves and drivers’ refusal to be drug tested. The report also includes a summary of trends in used equipment values.

Trucking Industry Trends to Watch in 2024

In 2024, the trucking industry faces significant challenges and stands at the edge of a new era of change. The key to success lies in adapting to evolving circumstances, including changes in regulations, a shortage of workers, shifts in the economy and a commitment to being environmentally friendly. Adaptability is essential, and trucking companies that can effectively respond to these trends will likely see lasting growth and improvements in their service.

The more significant trends expected to affect the industry in 2024 are summarized below. Through knowledge and insight, companies can adapt and seize opportunities to achieve sustainable growth and operational excellence.

Green Trucking and Sustainability: The industry is transitioning towards sustainability through the adoption of electric and alternative fuel vehicles, emissions reduction strategies and infrastructure development. These efforts highlight the sector’s commitment to minimizing its environmental impact despite facing infrastructure and policy hurdles and to positioning sustainability as a strategic business advantage.

Advanced Technologies: The trucking industry is undergoing a digital revolution integrating AI, telematics, blockchain and IoT technologies. These advancements are optimizing logistics operations, enhancing fleet management, improving data privacy and security and driving efficiency, safety and environmental friendliness, thereby securing significant competitive advantages for companies.

Workforce Management: To address the critical driver shortage, the industry is focusing on boosting recruitment, raising wages and improving job conditions. Efforts include competitive salaries, better work-life balance and enhanced driver amenities, making trucking an attractive career choice and demonstrating the industry’s commitment to its workforce.

Regulatory Adaptation: Navigating regulatory changes is essential for the trucking industry, with companies investing in technologies to ensure compliance, especially regarding emissions standards, safety regulations and compliance monitoring. These adaptations demonstrate a commitment to environmental stewardship, safety and operational efficiency.

Market Dynamics: Companies are adapting to rising operational costs, navigating economic uncertainties and managing capacity to remain competitive and profitable. Monitoring market conditions and consumer behavior is vital for strategic planning in both the truckload and less-than-truckload sectors.

Possible Supply Chain Disruptions: The past few years have shown how vulnerable the global supply chain is. With weather patterns becoming more extreme and geopolitical tensions prevalent, it’s critical to develop contingency plans in case of a disruption. This can include widening pools of suppliers and using predictive analytics to anticipate potential issues that may occur.

Trucking Industry Opposes New Biden Rule on Electronic Trucks

On March 29, the Environmental Protection Agency (EPA) announced new, tougher-than-expected Phase 3 emission standards for medium and heavy-duty trucks. The new standards see CO2 emissions slashed by 25% by 2032 for sleeper cab tractors, up to a 60% reduction for light-heavy vocational trucks. Notably, 25% of all trucks will have to be electric by 2032, according to the regulations. The Phase 3 standards begin in model year 2027 and will be phased in over six years.

The trucking industry believes the new standards encompass unachievable targets and will carry real consequences for the U.S. supply chain and movement of freight throughout the economy. Currently, fewer than 2% of new heavy trucks sold in the U.S. comply with the new standards.

“ATA opposes this rule in its current form because the post-2030 targets remain entirely unachievable given the current state of zero-emission technology, the lack of charging infrastructure and restrictions on the power grid,” Chris Spear, president and CEO of American Trucking Associations, said. “Any regulation that fails to account for the operational realities of trucking will set the industry and America’s supply chain up for failure. The trucking industry is fully committed to the road to zero emissions, but the path to get there must be paved with common sense. We will continue to work with EPA to address its shortcomings and advance emission-reduction targets and timelines that are both realistic and durable.”

According to the Engine Manufacturers Association (EMA), while there are nearly 200,000 public chargers for electric passenger vehicles, there are currently just 5,000 charging stations in the U.S. that are capable of serving heavy-duty trucks. The EMA estimates that about 1 million of those chargers would be needed to serve the number of electric trucks envisioned by the truck regulation.

“If the infrastructures are not there, customers simply will not be able to operate zero-emission vehicles,” Jed Mandel, president of the EMA, said. His organization includes the nation’s three largest truck manufacturers—Daimler Truck, which owns Freightliner, Volvo Trucks and Traton, a unit of Volkswagen that owns Navistar. A recent study commissioned by the Clean Freight Coalition highlighted the significant infrastructure investment of an estimated $1 trillion needed to electrify the nation’s medium- and heavy-duty vehicle fleet.

Biden Delays Plan to Restock Emergency Oil Reserve

In early April, the Biden administration announced that it would not move forward with its latest plans to buy oil for the Strategic Petroleum Reserve amid rising prices. The move follows a rally in crude prices, with U.S. benchmark West Texas Intermediate breaking above $85 a barrel on April 2 for the first time since October. The Biden administration has a target to buy oil at $79 or lower to refill the reserve, though an average of about $81 a barrel was spent in its latest purchase of 2.8 million barrels in March.

The Department of Energy (DOE) said it was “keeping the taxpayer’s interest at the forefront” in its decision not to purchase as many as 3 million barrels of oil for a Strategic Petroleum Reserve site in Louisiana. The plan had called for the barrels to be delivered in August and September.

The DOE has been slowly refilling the emergency oil supply after it reached a 40-year-low following the administration’s drawdown of a record 180 million barrels last year in a bid to stop gasoline prices from rising during production cuts by OPEC and a ban on Russian oil imports because of the war in Ukraine. According to the DOE, the emergency supply currently holds about 363 million barrels, down from almost 600 million at the start of 2022.

“Domestic crude prices are likely to remain too high for the remainder of the year for DOE to resume its refilling program,” Bob McNally, president of consultant Rapidan Energy Group and a former adviser to President George W. Bush, said. “If pump prices keep rising, the Biden administration will shift gears and reconsider releases, though we currently do not think they are imminent.”

Drivers Refuse to be Drug Tested

According to the Federal Motor Carrier Safety Administration (FMCSA), the number of positive drug tests among commercial truck drivers declined by more than 10% in 2023 compared with 2022. Although the number of drug violations declined, the FMCSA attributes the improvement to nearly a 40% increase in drivers’ refusals to take drug tests: “We’ve observed that even though the number of positive drug tests dropped for the first time in relation to the previous calendar year, the number of overall drug violations reported to the FMCSA Drug and Alcohol Clearinghouse continued to increase, reaching 68,229 drug violations in 2023 compared with 67,775 violations in 2022.”

A June 2023 report completed by the American Transportation Research Institute (ATRI) noted that the federal prohibition of cannabis “has been highlighted as a potential disincentive for drivers to stay in the industry, and it has even been argued that loosening the restrictions on marijuana use would make the industry more attractive and widen the potential labor pool.” The ATRI report also noted that fear of positive testing over cannabis metabolites, which can remain in a person’s blood long after consumption, could be discouraging would-be truck drivers.

The surge in drug testing refusals comes at a critical time for the transportation industry, which is struggling with a nationwide shortage of drivers. This shortage has profound implications on the supply chain, affecting everything from the availability of everyday consumer goods to the stability of national economic growth. Industry experts argue that stringent drug testing policies, which may inaccurately flag drivers as impaired, are exacerbating the shortages. Also, a large number of drivers who tested positive in past years are not registering to return to work.

Trends in Used Equipment Values

According to J. D. Power, the March auction volume for Class 8 used trucks increased for another month, and most trucks brought noticeably less money than in February. The majority of late-model sleepers moving through auction channels have exceptionally high mileage for their age.

Irontrax has observed a decline in the pricing of all late-model used trucks (sleepers and day cabs) and trailers with higher mileage, however, those with lower mileage are still holding their values. It appears the secondary market is not going to overpay for equipment

The average pricing for late-model sleepers for March 2024 was as follows:

  • Model year 2022: $96,970; $12,220 (14.4%) higher than February
  • Model year 2021: $49,816; $4,661 (8.6%) lower than February
  • Model year 2020: $31,793; $5,271 (14.2%) lower than February
  • Model year 2019: $27,206; $3,911 (12.6%) lower than February
  • Model year 2018: $21,498; $3,293 (13.3%) lower than February

In nominal figures, the values for the newest model years available in the marketplace are now about 10% higher than they were during the strong pre-pandemic period of 2018, but about 9% lower if adjusted for inflation. Current pricing is about 67% higher than the last market all-time low in late 2019, or about 39% higher if adjusted for inflation.

Market performance during the first quarter of 2024 was defined by a return to depreciation after a stable 4 to 5-month period. This “second wave” of devaluation appears to be a combination of individuals and small fleets leaving the industry, frequently as a result of loan default, and ongoing trade activity as new equipment is received. Late last year, price stabilization suggested the market was absorbing this increased inventory. That dynamic changed as the 2024 market opened up in February.

With many segments of the U.S. economy approaching or within a trough in their business cycle, the immediate forecast for truck sales isn’t a great one. However, with a pre-buy looming and indicators that an economic rebound could begin as early as the third quarter, experts believe any market softening that occurs in 2024 will be shallow and short-lived.

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