The trucking industry is facing a financial crisis so bad it’s being called a “bloodbath.” Here’s what you need to know.
2019 has been a dismal year for the $800 billion trucking industry. Truck move 72% of America’s goods but the recent downturn has been so epic, truckers themselves are calling it a “bloodbath.”
The industry is plagued by consistent wild fluctuations in prices and therefore revenue.
In 2018, trucking prices got so high, places like Amazon started passing on these price hikes on to customers.
That year USA Truck reported Q2 net revenue of $2.5 million. A year later, they reported just $1,000. Seriously.
That’s the kind of financial swing trucking companies face, even in a strong economy. And many trucking companies are expected to go bankrupt in the midst of this current crisis.
Signs the trucking industry bloodbath is over
There are some signs of life.
Retails sales are up and big names like UPS and J.B. Hunt announced better than expected earnings in July.
But there are also some mixed signals.
Total miles driven increased from 2018. That’s a good thing. However, revenue per load, a key measure of yield in the trucking industry, fell year over year.
And more trucks on the road isn’t a clear cut good thing for truckers. It’s more complicated than that.
Trucking industry disruption
At the heart of this trucking crisis is that retailers are moving to cheaper on-demand trucking services rather than organizing shipping through larger pre-arranged contracts.
It’s not dissimilar to Uber disrupting the cab industry.
In response, USA Trucking has announced it will cut fixed costs by as much as 10% and attempt to add new customers to offset the dip in rates under this new model.
An equally big issue though is that 2018 was such a boom year for trucking, there was simply too much capacity.
More trucks mean lower prices. It’s supply and demand 101, so some experts believe the struggles in 2019 are simply just a market correction.
Surviving in uncertain times
The trucking industry fluctuations are unlikely to end any time soon. That means companies who are able to ride out the lean times will be the ones left standing to cash in on boom years like 2018.
As always at Velocity Capital, we specialize in alternative financing for trucking entrepreneurs looking to grow their business or get through a temporary market dip.
Those who endure are most likely to reap the rewards of this online retail revolution that absolutely requires ground shipping and is only set for more growth in the years ahead.