Structural Changes in Road Freight – Who Are the Winners and Losers?

By Charlotte Goldstone 18/09/2024

According to Transport Intelligence (Ti) analyst Thomas Cullen, the road freight industry is undergoing “structural changes” with clear winners and losers.

In his latest North American Road Freight Update report, Cullen noted that the less-than-truckload (LTL) market is thriving, with “market share seemingly increasing,” and major providers like XPO experiencing strong gains.

However, full truckload (FTL) operations appear to be “significantly less profitable,” with market share gradually being eroded by LTL. He mentioned that major provider JB Hunt saw a 12% year-over-year decline in FTL revenue for the second quarter of 2024.

“It is clear that third-party trucking companies have suffered losses over the past year,” Cullen stated.

“Overall, one key factor appears to be the shift from full truckload (FTL) to less-than-truckload (LTL). In the long term, this trend is more challenging for FTL companies than any supply issues,” he said.

He told The Loadstar, “While some ‘legacy’ companies in traditional services like FTL are struggling, other areas are growing.”

Ti’s analysis shows that some last-mile delivery businesses are experiencing “surprisingly strong growth,” while consolidators FedEx and UPS “may be losing market share to different types of last-mile providers.”

“The issue with FedEx and UPS is interesting. Some data, like from JB Hunt, show that ‘last mile’ operations are performing well,” Cullen told The Loadstar, noting that JB Hunt saw a 5% year-over-year increase in second-quarter last-mile delivery business.

“Could it be that companies like JB Hunt are undercutting UPS and FedEx on price, leading to their loss of market share? Is this because some customers are buying highly price-sensitive products from Temu and Shein? And Amazon is also increasing its freight volume.

“Are FedEx and UPS feeling the squeeze?”

“The road freight industry is undergoing structural changes, with the shift towards less-than-truckload (LTL) being just one of them,” Cullen told The Loadstar.

Meanwhile, a long-standing concern for stakeholders has been labor — particularly driver shortages and costs.

But Cullen pointed out that “labor volatility seems to have decreased, with large trucking companies finding it less difficult to hire and retain drivers.”

He explained this could be due to “aggressive wage growth.” In fact, according to the American Trucking Associations, driver wages increased by 10% on average over the past year.

While this appears as an additional cost for operators, “reports from large truck service providers indicate that the impact of rising driver wages is becoming more manageable,” Cullen said.

Source: The Loadstar