Before the pandemic took hold in 2020, trucking operational costs dropped in 2019, according to the American Transportation Research Institute.
The industry experienced a decline in freight shipments in 2019. That changed after the Covid 19 pandemic hit, the industry long considered the nation’s most vital transportation mode would face skyrocketing needs for distribution of food, medical supplies and other necessities.
While the first half of 2019 rode in on the coattails of an unparalleled year of economic growth in 2018, the latter half of 2019 softened economically, Murray and Williams noted. “Many economists described the last two quarters as recessionary. The overall outcome was considerable volatility in trucking operations and the requisite costs.”
The economic softening, combined with a number of independent factors, including lower fuel prices, decreased the marginal cost of trucking.
The average marginal cost per mile in 2019 decreased 9.3% to $1.65. Costs for almost every major line item saw some level of decrease.
Also seeing a decline in 2019 were truck/trailer lease or purchase payments (-2%), permits and licenses (-5%), repair & maintenance (-16%) and tires (-5%). Not surprising to anyone who has been traveling on urban highways, tolls were one of the few costs to rise, jumping 15%.
Also seeing the first declines in years were driver wages and benefits costs, down from 77.6 cents per mile in 2018 to 69.3 cents per mile. However, driver retention bonuses increased, by more than 80%. The average starting bonus rose from $1,562 in 2018 to $1,846 in 2019 –an increase of 18%,
“While the cost per mile for total driver compensation fell, carriers are clearly addressing the driver shortage through other mechanisms,” ATRI said. “Even with freight demand softening in 2019, the driver shortage continued to persist throughout the year, and is expected to worsen in the coming decade.” The shortage is expected to top 160,000 drivers by 2028.
Safety bonuses also increased about 11% from 2018 to 2019, from an average of $1,238 to $1,373. “Companies are incentivized to invest in safety, as large verdicts due to crashes have been increasing over time and putting strain on businesses,” ATRI explained
A decline in insurance costs was the biggest surprise. Truck insurance premiums increased nearly every year since 2012, with some years experiencing double-digit increases, but 2019 saw a 1.6-cent-per-mile drop from the previous year.
ATRI says fleets are maxed out on their ability to absorb another year of higher insurance premiums, and have responded by dramatically increasing deductibles, reducing excess insurance coverage and moving to captive insurance programs.
“While these short-term approaches to manage cost increases appear to be stabilizing insurance costs, the long-term result is a potentially catastrophic increase in accrued carrier risk,” it said.
“Looking forward, 2020 data will certainly reflect the most impactful year of social, medical and economic change seen in many generations,” ATRI predicted.
“Until a full year of 2020 data is collected and analyzed, only anecdotal analyses are available. Given the increasing freight demand and the pressures of the driver shortage, it is likely that driver wages in 2020 will increase.”
Shelter-at-home policies and other factors have kept fuel costs down and are expected to continue to do so in 2021. In 2019, fuel costs per mile were 39.6 cents per mile, decreasing from 43.3 cents per mile last year.
Dropping almost 9% from 2018 to 2019, most of the fuel cost decrease can be attributed to substantially lower diesel costs in 2019, ATRI said