According to the American Transportation Research Institute’s recent update to its “Analysis of the Operational Costs of Trucking,” overall trucking operations costs have decreased. These findings come from 2019 financial data representing motor carriers across all fleet sizes and sectors.
The new report indicates a freight decline taking place during the last six months of 2019. Because of this, along with fuel prices dropping during the same period, the marginal cost of trucking fell as well.
Per mile, the average motor carrier marginal cost was $1.65 in 2019, a 9.3% decrease from the cost per mile of $1.82 in 2018.
“In 2018, trucking encountered record demand and the highest tonnage in the last 20 years,” said ATRI in its November report. “In the contraction that followed in 2019, a number of independent factors were at play to lower the operational costs of trucking.”
For the report, ATRI split costs into two separate categories–vehicle-based motor carrier costs and driver-based motor carrier costs. Fuel, repair, maintenance, licenses, tolls, insurance premiums, and truck lease and purchase payments made up vehicle-based costs, and wages and benefits made up driver-based costs.
The majority of major line item costs saw an overall decrease from 2018 to 2019, with the biggest drops taking place within truck insurance premiums (which dropped by 19%), and repair and maintenance costs (which dropped by 16%). Fuel costs saw a slightly smaller percentage decrease of 9%.
Additionally, around 15% of fleets took advantage of alternative fuel during 2019, 2% more than in 2018. For these alternative fuel methods, compressed natural gas options had the highest rate of adoptions in both years, and battery/hybrid models had the lowest rates of adoption.
Finally, the industry saw a slight drop in driver wages and benefits, coming to 69.3 cents per mile in 2019 from 77.6 cents per mile the year before. Still, overall benefits and wages are above 2016’s numbers–a year when the trucking industry saw more freight softening. Carriers continue to use higher wages as a way to attract and retain drivers, although the numbers dropping, even slightly, are no help to the current driver shortage.
However, many fleets have found loopholes.
“We’re still mining data to some degree, but it does look like the increase in starting and retention bonuses probably comes close to offsetting any declines we saw in wages,” assured Dan Murray, Senior Vice President of ATRI. “That was just sort of a new approach to compensate the drivers without necessarily raising wages.”
The decline in driver wages, according to Murray, comes from the trend of offering retention and starting bonuses as well as an uptick in entry-level driver on-boarding, as new truckers typically make less than more senior drivers.
Retention bonuses rose by more than 81% between 2018 and 2019, with the average starting bonus also increasing from $1,562 to $1,846 (18%), according to the analysis.
These bonuses are a panic-induced response to the driver shortage continuing on within the entire trucking industry, explained Sean McNally, spokesman for American Trucking Associations. The industry was short 60,800 drivers at the end of 2018, ATA estimates.
“These bonuses showed a recognition of the need to adequately compensate drivers by fleets, and that helped offset some of the economic softening toward the end of the year,” said McNally.
Still, ATRI’s report indicates that driver wages are likely to see a huge boost during 2020 due to increased trucker demand throughout the COVID-19 pandemic. With stay-at-home orders causing many more Americans to shop online, and with the surge in demand for medical equipment, resources, and personal protective gear, truckers have been working harder–and for longer hours–than ever before.
“I think e-commerce is growing stably, but in 2020 it will see huge leaps,” Murray predicts. “The million-dollar question is, ‘Is it temporary, or have we made a permanent change to eating, sleeping, [and] breathing on the internet?’ We don’t know at this stage.”
Regardless, transportation and logistics group CliftonLarsonAllen’s Brandon Knight said fleets need to be keeping as close an eye as possible on their current expenses.
“Given the chaos and volatility of freight markets these days, it is more critical than ever that trucking fleets closely monitor their cost centers,” he said. “ATRI’s Operational Costs report is an important benchmarking tool for fleets of all sizes and sectors.”