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May 23, 2018

The Future Of The Freight Industry

In September of 2016 the Cass Freight Index reported that the freight industry had fallen to its lowest level since 2010. This represented the 18th straight month of declines for road haulage in America. This downturn accompanied an overall slowing of the US economy and many experts speak of the freight industry as being a key indicator for the health of the economy as a whole. As we are now well into the second quarter of 2018 we see the freight industry at an all time high and in fact there is a strong indication that it would be performing a lot better if it had the capacity in the system to do so. The movement of goods across our land built the infrastructure, and road and rail networks we take for granted. Will this ancient and honorable industry continue to fluctuate as the tides of our great economy ebbs and flows, or are we seeing the last great hurrah for something that has had its time?

A Bright Future

The Bureau of Transportation Statistics believes that the trucking industry is going to continue to grow with the value per ton moved predicted to increase by over $400, even when adjusted for inflation, by 2045. They predict a slightly slower, but still significant growth in the volume being shipped too in the same timescale. These predictions are based upon expert reflection on the trends of the past but they also rely on future trends remaining the same as current ones. Technology within the trucking industry has remained relatively static for decades. Whilst modern trucks are undoubtedly far more comfortable, economical and high-tech, this is just a veneer over a system and vehicle that is virtually the same as 50 years ago. With the world around it changing will these rosy predictions prove to be true?

A Changing Population Will Bring A Changing Industry

The US population continues to be redistributed and the growth of e-commerce continues to change what will be hauled where. These changes come alongside a boom in the so-called “last mile transport” where smaller vehicles compete to make deliveries to the door of customers. The current trends and changes are predicted to change the way the industry operates but they are not expected to change the overall size and scale of it. With more goods needing to be delivered to increasingly spread out places we are still going to need bulk distribution to central logistics hubs but this will be accompanied with an increased growth in the medium to small haulage industry.

The Success Of The Industry May Be Its Downfall

The success of the freight industry has been tethered due to a lack of skilled drivers. Whilst new drivers are being trained this is an uncertain industry that not everyone wants to get into, especially with the risk of a crash. The industry has tried to solve its problem by raising the average wage of a trucker, but this solution, again, may be the final nail in the coffin for the industry as we know it. Self-driving trucks are far further alone than their automobile equivalents and they have an exceptional safety record (hardly surprising since 90% of truck crashes are due to human error). Whilst the industry may continue to thrive it will do so without its drivers. In one fell swoop the work of Daimler will solve the driver shortages, slash the cost due to staffing and reduce the impact on the environment.

The Trucks As We Know Them Will Go

As AI moves in we will see the internal combustion engine move out. Whilst Tesla is making great headlines by touring their new electric trucks, these waves will soon be swamped in a tsunami. The promise of a new class of electric vehicle may have attracted the attention of the general public but those within the industry knew that there was a real player about to change the game. The industry behemoth that is Volvo’s trucking arm made a recent announcement that ever so quietly killed diesel and Tesla in one shot - They are launching their fleet of electric trucks in Europe next year and will follow suit in North America very soon after. This is no entrepreneur testing the water and trying to shake up an industry, this is a giant marking a move to a new norm.

The Future Is Bright For The Industry, Just Not Everyone In It

The haulage industry is growing and will continue to do so. While the journeys being made will change there is still going to be a growing need to haul goods around the country in bulk. In the short term, self-driving trucks will need human co-drivers to monitor them and take over in busy urban areas but this is only going to be for a relatively short period of time. The days of noisy and smelly trucks have ended and the future will look much like that seen in Marvel’s recent film, Logan; electric trucks silently flying down freeways being driven only by the AI inside them.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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