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2024: What's in Store for the Trucking Industry?

2024: What's in Store for the Trucking Industry?

The trucking industry is famously boom-or-bust, and 2023 was a bust. While experts agree that the market should rebound in the not-too-distant future, it’s currently unknown when signs will actually begin to show. The mixed signals provided by industry markets and the U.S. economy to end 2023 have continued into the new year thus far.

As a result, several experts have started to predict that 2024 could be a very unremarkable year where conditions don’t necessarily worsen, but any progress made will be incremental at best. Two primary reasons are responsible for the slow recovery. The first is excess truckload capacity, which is still an issue. The COVID-19 pandemic led to a massive number of new entrants into the market. In fact, the number of carriers receiving FMCSA authorization increased by over 128,000 from 2019 through 2022.

The influx of new authorities made it harder for carriers to move freight and led to the continued ongoing problem of significantly reduced rates and overstocked inventories. In Q4 of 2023, however, the FMCSA saw its highest net decrease in carriers, with over 2,500 leaving the industry. Additionally, the total number of newly authorized carriers reached its lowest point since June 2020. The vast majority of those both entering and leaving the industry are fleets with two or fewer trucks. This points to a correction in capacity that should continue in the coming months, though at a very gradual rate.

The second reason is consumer and commercial demand continues to lag. While capacity correction will have a positive impact on freight markets, decreased competition by itself likely isn’t enough to drive a recovery. A rebound in freight markets will likely involve reduced capacity coinciding with increased demand levels. Even though consumer spending has remained stable, though, it hasn’t been enough to drive down inventory levels as demand has shifted more toward services and experiences rather than goods.

A major reason for the pandemic-driven boom in freight markets was the fact that consumers were stocking up on goods in case they were needed in emergency situations. This led to an increase in global imports and manufacturing output. However, recent months have shown that consumer spending and inventories have normalized to levels closer to that of the pre-pandemic era. Unfortunately, an increase in consumer demand appears unlikely in the immediate future.

High interest rates on payments like auto loans, credit cards and more, as well as price increases on staple goods like food, may lead to reduced spending. With that said, the Federal Reserve is set to lower interest rates at some point during the year, which could lead to increased consumer and commercial spending. In terms of regulations, there are two major proposed rules that have major cost and operational implications for the industry.

The first is a proposed rule addressing the distinction between independent contractors and employees, which will “make waves when it’s delivered,” given that analysis of the proposal shows it would likely tilt the playing field heavily toward employee status. The policy change would place a heavier burden on trucking companies that rely on independent contractors to show that their drivers are in fact independent workers and not employees, potentially disrupting relationships that have been mutually beneficial to owner-operators and large carriers.

The second is the Environmental Protection Agency’s new emission standards for heavy-duty trucks beginning in model year 2027 and extending to 2032. The new standards, which would rely heavily on a switch to electric vehicles, add roughly $15,000 to the cost of a new sleeper cab, according to EPA estimates.

In addition, guidelines on the use of hair to test for drugs, which has been under review at the White House for much of 2023, could finally be published by the U.S. Department of Health and Human Services in 2024. Even if HHS finalizes it in 2024, DOT will still need to incorporate the HHS standard into the DOT drug testing rules that would allow industry to use hair as an alternative sample to urine or oral fluids, which could take another year.

Finally, speed limiters for heavy trucks, automatic emergency braking and oversight of automated driving systems are all scheduled to roll out in 2024.

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