With all of the news reports of high freight demand recently, many think the current trucking conditions will continue for a long time. And they may. But some veteran trucking executives say the good times in the industry will not last forever.
According to FreightWaves, three major technological disruptions will drastically shrink demand for for-hire trucking services within the next decade. Nearly 20% of for-hire truckload freight is at risk, putting the trucking industry in a position to experience one of the most drastic freight-demand declines in history.
The technologies FreightWaves refers to is not industry advances like autonomous vehicles, but rather technologically-driven market changes that impact three of the segments that truckers serve.
They are retail, autos, and agriculture.
Today, e-commerce represents 13% of all retail sales, and retail accounts for 21% of all trucking freight. Quick arithmetic would tell you that e-commerce currently accounts for only 2.7% of all trucking freight.
Consulting firm A.T. Kearney estimates that e-commerce will represent nearly 32% of all retail sales by 2030 which means e-commerce should be around 7% of the entire trucking market.
With Amazon having nearly 50% share of e-commerce sales in the U.S., we can conclude that today over 3.5% of all truckload freight comes from them.
This enables them to build private dedicated freight networks that for-hire carriers donโt see. If Amazon were to continue to dominate e-commerce at the same percentage, they would control a purchased transportation budget of approximately $30B of truckload volume. This puts them in a category of density that is only matched by the big-three parcel carriers- UPS, FedEx, and USPS.
Amazon, which spends over $6B dollars today on truckload freight, has been moving more and more freight over to intermodal. Also, they plan to build out their internal linehaul network with a set of dedicated and semi-dedicated owner operators. FreightWaves says it is very clear that Amazon wants to control as much of their freight as possible, relying less and less on for-hire carriers as they ramp up.
The automotive sector is responsible for 9% of all trucking freight. If autonomous electric vehicles become a decisive force, then it could mean that consumers buy less automobiles.
Some experts argue that transportation-as-a-service will become the norm, citing research stating that using a car service will be one-tenth of the cost of owning a vehicle.
Tony Seba, author and futurist, believes 95% of passenger miles will be on electric and autonomous vehicles and the U.S. automotive fleet will shrink 80%. Additionally, the demand for individually owned vehicles will drop 70%, and 80-90% of the current parking lots in America will be vacant.
Although it seems hard to believe that things will change that much, it seems plausible that families will reduce their automobile purchases to just one vehicle and because of the durability of electric powertrains, they are likely to hold on to them much longer.
This is already happening in major cities around the world. Luxury home builders in Vancouver have started to build homes with garages for a single car, recognizing that consumers with on-demand services for commuting were not buying two cars.
With the auto supply chain representing 9% of the trucking freight volume, knocking out 80% of this would mean a loss of around 7.2% of all trucking freight.
FreightWaves also says agriculture is about to get completely disrupted by technology. The concept of urban agriculture means food will be grown within about fifty miles of where it is consumed and wonโt need as much freight transportation.
Freight costs as a percentage of the final agricultural product cost, tends to be much higher than in other verticals also, accounting for as much as 70% of the final cost of the product.
Agtech startups are trying to radically change the industry through the development of vertical and indoor agriculture.
The other part of the ag freight market has to do with lab-grown meat. Lab grown meats are genetically identical to animal raised meat, except they are grown using in-vitro cells from live animals and replicated.
According to the Transportation Research Board, agricultural products account for 31% of total ton-miles of freight moved. Furthermore, trucks move over 90% of the nationโs fresh fruits and vegetables and 95% of livestock transportation.
Produce and livestock trucking is estimated to generate nearly 18% of trucking industry revenue. If you source food farmed locally, you have no need to truck long distances. If just half of the food goes this way by 2030, 9% of freight volume would be at risk.
According to FreightWaves prediction, the trucking carriers are enjoying favourable conditions now, but within a few years that will start to change. By 2030, consumers will likely be buying their daily produce on Amazon that was farmed locally indoors with a side-order of lab filet, delivered in an autonomous vehicle direct to their home. The trucking industry, faced with less and less freight, will also let look dramatically different as a result.
