FINANCIAL • Oct 29, 2024

Surviving the Post-COVID Shift: Why Experience Matters More Than Ever in Trucking

4 minutes read

The trucking industry has been on a financial and operational roller coaster in recent years, and 2024 presents its own set of unique challenges and opportunities. Here, we break down the current landscape and rising costs and provide a real-world example of today’s average trucker’s budget. With these insights, you'll be better prepared to navigate the coming year and understand how the market is evolving post-COVID.

1. A Post-COVID Industry Overhaul

The pandemic reshaped the trucking industry, flooding it with demand as e-commerce soared. Government loans, grants, and stimulus packages opened the doors for many new, often inexperienced, companies to enter the market. However, these new entrants frequently relied on low-ball rates to secure clients, ultimately destabilizing pricing standards across the board.

The result? Many shippers and brokers who sought cheaper options saw increased losses from working with inexperienced carriers who couldn’t deliver quality, reliable services. While rates dropped, the prevalence of fraud surged, with phishing scams allowing fraudsters to impersonate legitimate carriers, resulting in lost loads and damaged reputations.

Now, the industry is shifting towards a more cautious approach. Surviving companies are focusing on tightening their operations, improving risk management, and establishing stricter fraud prevention practices. This trend will likely lead to more stabilized rates in the coming years, strengthening those who adapt and excel in risk management and service quality.

2. The Cost of Staying Competitive in 2024

For the average trucker or fleet owner, expenses have risen across multiple categories. Here's a breakdown of key costs that have seen an uptick this year:

Insurance Premiums: With a 12.5% increase on average, insurance now represents a critical but costly part of operations. Fraud incidents and claims have forced many carriers to adopt more robust policies, but these come at a higher price.
Driver Wages: Labor remains competitive, with wages up by 7.6% as companies work to retain experienced drivers. Carriers can expect this trend to continue, especially as the industry seeks to attract and keep top talent.
Fuel and Maintenance: While fuel prices dropped slightly from the previous year’s high, maintenance costs have stabilized with only modest increases, yet remain higher than pre-pandemic levels due to inflation and supply chain bottlenecks for parts.
Fraud Prevention: Carriers are investing more in technology and training to combat fraud and unauthorized load interceptions. This is an added cost but one that mitigates risk and secures reputation.

3. Example Budget: The Average Trucker in 2024

Below is a sample budget for a solo owner-operator or small fleet in 2024, based on recent cost insights from the American Transportation Research Institute (ATRI) report and industry data:

Fixed Costs:

General:

Truck Insurance: $15,188
Drug & Alcohol Testing: $125
Motor Vehicle Reports: $40
Pre-Employment Screening: $40
Training Supplies: $60
Onboarding Vehicle Inspection: $150
ELD Device: $180

Licenses, Registration & Tax:

Company Annual Report: $150
HUVT 2290: $600
IRP Renewal: $2,150
Annual Vehicle Inspection: $150
UCR: $105
MCS-150: $50

Services:

Fuel Card Service Fee: $672
E-Z Pass Fee: $428
ELD Portal: $420
Tax Office CPA: $1,000

Phone and Internet:

Cell Phone: $1,200
Internet: $600

Software:

QuickBooks: $1,200
Load Board: $1,800
DocuSign: $300
Amazon Prime: $100
Risk Management Software: $1,800

Other Business Expenses:

Rent: $15,600
Utilities: $720
Salaries and Wages: $60,256
Marketing: $2,000
Parking: $1,980

Adjusted Fixed Cost Total: $109,064

Variable Costs:

Permit, Tolls, Taxes:

IFTA Quarterly Filing: $3,500
Permits (KY, NJ, NM, NY, OR): $300
Tolls: $760
Scale: $100

Travel Expense:

Hotel/Lodging: $722
Paid Parking on the Road: $198

Office:

Office Supplies: $400
Postage: $50

Maintenance & Other Operational Expenses:

Fuel: $33,250
Preventive Maintenance: $3,100
Reactive Maintenance: $9,120

Adjusted Variable Cost Total: $51,500

Summary

Adjusted Fixed Cost: $109,064
Adjusted Variable Cost: $51,500
Total Annual Cost: $160,564

For a typical 70,000 miles driven annually, the average cost per mile has reached $2.29, reflecting increases in most operational areas.

4. Looking Ahead: Strategies for Resilience

As we progress through 2024, trucking companies that succeed will likely have a strong focus on:

Risk Management: Embracing technology to prevent fraud and optimizing insurance policies to protect against financial loss.
Efficient Cost Management: Carefully managing maintenance cycles and fuel efficiency to keep per-mile costs competitive.
Strategic Partnerships: Prioritizing relationships with reputable shippers and brokers who value quality over cost-cutting, helping to stabilize rates and reduce market volatility.

The companies that survive this year will emerge on the other side of these challenges stronger and better prepared for long-term growth. With stabilized rates on the horizon and a renewed focus on quality service, the future holds promise for those who stay adaptable and forward-thinking in their approach.