There seems to be a great deal of interest lately in the future of trucking. Industry analysts have been devoting a heck of a lot of ink in trying to figure out how the face of the industry will change over the coming decades. Last month, I...
There seems to be a great deal of interest lately in the future of trucking. Industry analysts have been devoting a heck of a lot of ink in trying to figure out how the face of the industry will change over the coming decades. Last month, I spoke on that very topic at a well-attended symposium organized by the Transport Institute of the University of Manitoba and we’ve devoted a good bit of space recently in the pages of Fleet Executive to future-thinking industry executives and analysts.
Why all the fuss? Well, we are entering not only a new year but also a new decade. And we’ve just emerged from the worst economic downturn of the post-War era, so it’s only natural for industry folks to be looking forward to better times ahead. But trucking has also really taken it on the chin the last couple of years and the change we’ve seen as a result is monumental.
Consider just one change Jim Hebe, Navistar’s senior vice-president of North American sales operations, pointed to at the recent TMC. (Of, course, the fact that the charismatic and controversial Hebe, who became an industry icon during Freightliner’s reign as the North American Class 8 market share leader, is now speaking for rival Navistar, and has been for some years now, is, on its own, indicative of the change this industry has seen.) Long and tall, the beloved truck style of owner/operators and drivers across the land for decades, is “dead and gone,” according to Hebe. The classic long-nose conventional, which had also become a frequent spec’ among fleet owners looking to attract drivers, accounted for 25% of Class 8 sales back in 2000. Its market share has since dropped to less than 6% and Hebe believes the long-nose conventional is about to be placed on the endangered species list.
A large part of the reason the long-nose conventional seems destined to become part of the industry’s past is that when you get beyond looks, the reality is that it’s the biggest fuel hog around. That just won’t do in an industry that operates on thin margins and one of the most volatile and damaging costs it must deal with is fuel.
One of the more important questions for the future is how volatile energy pricing will affect transportation. Historically, minimizing energy consumption has not been a big-ticket concern among carriers and certainly not shippers. The oil price shocks seen in early 2008, of course, brought the issue into the foreground for both. A 45% price increase from January to July 2008, coupled with much greater short-term price volatility, was impossible to ignore. And so is the likelihood of a return to such high prices and the possibility of even higher ones as the global economy rebounds. At the very least, continued volatility in energy pricing is a sure thing.
The only way for a carrier to be able to justify having fuel-guzzling long-nose conventionals in its fleet is if it could truly pass on all fuel costs to its clients. But shippers were stung badly just before the recession with fuel surcharges, and although they may understand their necessity, I see them becoming much more aggressive in ensuring the carriers they contract with are as fuel efficient as possible.
Yet soaring oil prices may not prove to be the main driver for fundamental change in the industry. Rather, the need to significantly reduce greenhouse gas emissions may prove to be the main driver. PricewaterhouseCoopers (PWC) in its vision document, Transportation & Logistics 2030, boldly states: “We see reducing emissions as posing a greater challenge to T&L companies over the next 20 years than obtaining a sufficient supply of energy.”
Currently, transportation activity contributes approximately 37% to Canada’s total energy-related GHG emissions inventory. Roughly half of transportation emissions are attributed to freight transportation. From 2002 to 2006, GHG emissions increased 12.6% in the sector, with the trucking subsector comprising the majority of the increase. The situation has been exacerbated by a decoupling of air contaminant emissions from energy use (fuel efficiency has generally gone down to meet CAC emission standards from EPA). So trucking has a big bull’s eye on its back among legislators.
The stakeholders PWC spoke to were in agreement that over the next couple of decades, a system would be in place to ensure that the cost of carbon is allocated to the causer. And that will cause a significant challenge for commercial transportation.