Freight Shipping Factors Changing
We’ve been pointing to several issues that have elevated freight shipping rates over the last few years. The federal highway crisis funding expiring has been a hot topic as of late. But number one among them has been a lack of freight shipping capacity caused by a lack of vehicles, a shortage of drivers, and the use of Electronic Logging Devices that restrict how many hours and miles a driver can work each week.
Looking forward to 2020, some experts are looking at the first two issues — a lack of vehicles and a shortage of drivers — from a different perspective. If they are correct, shippers could see increased competition for their business among carriers reflected in the form of lower rates. Here’s why.
More Trucks on the Road
In the past few months, there has been an increase in the volume of freight shipped. Last year the additional freight would have squeezed already-tight capacity and made freight shipping a seller’s market, as it was in 2018. That hasn’t happened in 2019, largely because carriers reinvested a lot of the income they made in 2017 and 2018 into buying new trucks.
New orders for heavy trucks hit a record high of 53,100 in August 2018, 150% higher than they were in August 2017. In fact, 2018 set a new record for heavy truck orders, with a total of 490,000 orders placed, crushing the previous record set in 2004 by more than 100,000 vehicles. The 2018 federal tax cut incentivized spending on new trucks. Carriers saw the opportunity to upgrade their fleets with money they otherwise would have paid in taxes.
The new trucks are far more technologically advanced than older fleet vehicles, with sophisticated safety enhancements and fuel savings of as much as 50%.
The frenzy of new truck orders has put many more trucks on the road, and orders still need to be filled. But given the current shortage, there’s no one to drive them, right? Hmmmm …