Fleet Management News & Business Info | Commercial Carrier Journal
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I ndustry analysts painted a positive outlook for the trucking industry during the 2014 Commercial Ve- hicle Outlook Conference in Dallas. Attendees heard economic presentations from Donald Broughton, senior analyst for Avondale Partners, and Sandeep Kar, global director of automotive and transportation research for Frost & Sullivan. Broughton forecasts continued growth in the North American truckload market for 2015, while Kar looked out as far as 2022 from both North American and global perspectives, predicting a jump from 2.7 million me- dium- and heavy-duty trucks sold globally in 2013 to 4.6 million in 2022. "China will remain the biggest market for these trucks, but there will be good growth in North America and other areas of the world as well," said Kar. Broughton said that closer to home, truck tonnage is growing at a rate of better than 3 percent, while loads are growing about 2 percent. One reason Avondale remains bullish with its outlook for trucking is the spike in demand for loads related to oil and gas fracking operations in the Dakotas, Texas and other areas, adding that the efficiency of those operations has improved to the point that they are yielding five to six times what they were just five years ago. "Oil and gas operations in North Dakota alone will reach a level that is 20 percent of the total production of Saudi Arabia," said Broughton. "We are going to be an energy-independent country." A host of external factors such as the widening of the Panama Canal, the shift of manufacturing back to the United States and lower energy costs all are creating a new reality in the North American freight market, which bodes well for fleets, OEMs and industry suppliers. There's little doubt that the widening of the Panama Canal, when completed, will change freight flow pat- terns significantly in the United States. "You go from 40 percent of the nation's population being cheaper to serve through the canal on container ships to 60 percent," said Broughton. "A canal big enough to allow passage of larger post-Panamax ships eastbound is also big enough to push larger liquefied natural gas tankers westbound, and someone will figure out how to capitalize on that." Kar said by 2022, fleets operating in North America should expect an average annual operating cost of $183,000 – or $1.90 per mile – per truck, a 10 percent increase from 2013. Fuel costs will make up 29 percent of that cost in 2022 compared to 33 percent in 2013, while driver wages will increase from 28 percent to 31 percent in that same time. Maintenance costs are forecasted to drop from 11 percent to 9 percent thanks in part to more reliable power equipment. But Broughton said in the near term, truck operating costs are poised to stabilize. "We changed our outlook because the cost inflation has already been absorbed by many," he said, adding that many fleets with newer equipment and shorter trade cycles are buying $125,000 trucks to replace $120,000 trucks rather than replacing $100,000 trucks. But the flip side of that equation is that fleets with older equipment are trading in 10 used trucks and replacing them with only seven or eight, adding to the industry-wide capacity crunch. On the subject of advanced telematics, which was an overarching theme at this year's Outlook, Kar said one of the biggest opportunities is in prognostics and remote diagnostics. In 2011, such subscriptions totaled 102,731 in North America but are expected to grow to 1.21 mil- lion subscriptions in 2020. "Fleets will pay for any technology that reduces operat- ing costs if they can see the value," he said. "Telematics is reactive, and the onus is on fleet managers to do some- thing with the data. If you add advanced telematics, the system becomes far more intelligent and more proactive. More decisions that the fleet manager makes today will be done by the vehicle itself to consume the least fuel and generate the fewest emissions." Kar also said trucks in 2022 will be greener with lower emissions and higher fuel efficiency, safer and connected with vehicle-to-vehicle and vehicle-to-intersection capabilities. "When you add those three together, it truly will be a smart truck," he said. "The question will be: Are we smart enough to embrace the change?" 4 COMMERCIAL CARRIER JOURNAL | SEPTEMBER 2014 UPFRONT Economists lay out expectations for 2015 through 2022 BY JEFF CRISSEY Trucking's future bright next year and beyond JEFF CRISSEY is Editor of Commercial Carrier Journal. E-mail jcrissey@ccjmagazine.com.