Why is it so hard to get my car moved?

 I get asked by shippers (dealers, upfitters, fleet managers) every day about why it is significantly harder to move vehicles within the last year.

I thought I’d share some insights from the auto transporter end of the equation. The challenges to this segment of the shipping industry have been significant and is transforming the landscape of how business is conducted day to day.

The big impact challenges.

The automobile transporting industry in the United States is facing several major challenges, including rising fuel costs, insurance costs, and wage inflation. These challenges are impacting the profitability of carriers and creating concerns about the long-term viability of the industry.

Fuel costs are a significant expense for automobile transporters, and the volatility of fuel prices can impact the bottom line.

According to the U.S. Energy Information Administration, the average price of diesel fuel in the United States hit a recent peak at $5.78 per gallon in July 2022, which was an increase of nearly 147% from $2.34 per gallon in January 2021. Although the market has eased some, it is still at almost 82% higher than January 2021. This increase in fuel costs has put pressure on carriers to find ways to reduce fuel consumption, such as investing in fuel-efficient trucks or optimizing or eliminating nonprofitable routes.

This has caused significant impact on the velocity of the “new normal” of shipping from dealer to customers that are thousands of miles outside the dealer’s local market. Simply put, auto transporters have limited their reach and lane options due to the significantly decreased profitability of such moves.

Insurance costs are another challenge facing automobile transporters.

The nature of the industry, with large and expensive cargo being transported across long distances, creates a high risk for accidents and damage. As a result, insurance premiums can be quite expensive. According to the American Transportation Research Institute, insurance costs per mile for motor carriers increased by 12% from 2018 to 2019. This has led some carriers to implement more stringent safety measures and invest in newer technology to reduce risk and lower insurance costs. The astronomic increases in wholesale values of new retail units have also forced to the majority of auto transporters to significantly increase the dollar amounts of their cargo coverage.

Wage inflation is also a concern for the automobile transporting industry.

The industry has struggled to attract younger drivers, and the average age of a commercial truck driver in the United States is over 50 years old. As a result, carriers have had to offer higher wages and better benefits to retain drivers and attract new talent. According to the Bureau of Labor Statistics, the median annual wage for heavy and tractor-trailer truck drivers was $48,480 in May 2020, which is higher than the median annual wage for all occupations. This has put pressure on carriers to increase their rates to cover labor costs.

In a nutshell, the automobile transporting industry in the United States is facing three primary challenges related to fuel costs, insurance costs, and wage inflation. With the added impact of part shortages, disrupted retail and wholesale volumes and increasing technology costs, many auto transporters are pivoting to traditional freight or scaling back their operations significantly. As a result, auto transporters are looking for new ways to reduce costs, increase efficiency, and attract and retain drivers to stay in business.

References:

U.S. Energy Information Administration. (2022). Weekly U.S. Diesel Fuel Prices. https://www.eia.gov/petroleum/gasdiesel/

American Transportation Research Institute. (2020). An Analysis of the Operational Costs of Trucking: 2020 Update. https://truckingresearch.org/wp-content/uploads/2020/09/ATRI-Operational-Costs-of-Trucking-2020-Report.pdf

Bureau of Labor Statistics. (2021). Heavy and Tractor-Trailer Truck Drivers. https://www.bls.gov/ooh/transportation-and-material-moving/heavy-and-tractor-trailer-truck-drivers.htm