News / A structural shift in road freight – who are the winners, and losers?

18/09/2024

The road freight sector is “undergoing a change in structure”, according to Transport Intelligence (Ti) analyst Thomas Cullen, and there will be winners and losers.

In his recent North American road freight update, Mr Cullen highlights that the less-than-truckload (LTL) sector is buoyant and “seems to be increasing its market-share”, with major providers such as XPO enjoying strong returns.

However, full-truckload (FTL) operations appear “markedly less profitable” and are losing market share to LTL, he says and noted that major provider JB Hunt saw its Q2 24 FTL revenue fall 12%, year on year.

“What is clear is that the third-party trucking companies have suffered over the past year,” said Mr Cullen.

“Overall, a key factor seems to be the shift by the market away from FTL and towards LTL. In the longer term, it is probably this as much as any supply issue that is making life tough for truckload companies,” he said.

And he told The Loadstar that “while some ‘incumbents’ with traditional services like FTL were suffering, “other sectors are not and are growing”.

Ti’s analysis highlights that some last-mile operations are experiencing “surprisingly strong growth”while integrators FedEx and UPS “are possibly losing market share to different types of last-mile provider”.

“The issue of FedEx and UPS is interesting. Some numbers, such as those of JB Hunt, illustrate that some ‘last-mile’ is doing OK,” Mr Cullen told The Loadstar, noting that JB Hunt saw its-last mile operations increase 5%, year on year, in Q2.

“Could it be that UPS and FedEx are being undercut on price by companies such as JB Hunt and are thus losing market-share? Is this because some customers are buying products from Temu and Shein that are highly price-sensitive? And then there is Amazon, which has been taking higher volumes.

“Are FedEx and UPS getting squeezed?

“The road freight sector is undergoing a change in structure, with the shift to LTL just being one change,” Mr Cullen told The Loadstar.

Meanwhile, an element of the haulage market that has long been a source of strain for stakeholders is the shortage, and cost, of labour – specifically drivers.

But Mr Cullen noted that “the volatility in labour appears to have declined, with major trucking companies finding it less difficult to recruit and retain drivers”.

And he explained that this was likely due to “violent pay increases”. Indeed, according to the American Trucking Associations, average driver pay has increased 10% over the past year.

While this may seem like additional overhead cost for operators, “reports from the larger trucking services providers suggest that the cost impact of higher driver wages has become more manageable,” said Mr Cullen.