Rising demand and rising fuel surcharges will support revenue growth, but profit may weaken.
Los Angeles, California (PRWEB) July 26, 2012
The Local Freight Trucking industry has not fared well in the five years to 2012; slow manufacturing production and retail spending reduced demand and hurt revenue for the industry during the economic downturn. Declining demand caused greater price competition among operators, which limited profit margins. Additionally, soaring diesel costs dramatically reduced profitability in 2008, though many industry operators implemented fuel surcharges. According to IBISWorld industry analyst Lauren Setar, "These surcharges increase revenue but are not sustainable in the long term as customers seek alternatives." In 2012, profit margins are expected to increase to 6.4% of revenue due to rising demand; however, profit will remain below prerecession levels due to continued price competition and increasing fuel costs.
The industry performed miserably in 2009 when revenue plummeted 20.5%. "Weak operating conditions pushed firms into record losses in 2008 and 2009, forcing some operators out of the industry completely," adds Setar. Furthermore, a drastic reduction in diesel prices in 2009 caused revenue from fuel surcharges, which are tacked on when diesel prices are high, to decrease during the year. Consequently, revenue is expected to fall at an average annual rate of 3.3% to $32.4 billion during the five years to 2012. In 2012, IBISWorld expects that recovering demand and increased shipping volumes will cause industry revenue to lift by 2.0%.
The Local Freight Trucking industry has a low concentration due to the relative ease of entry and exit, which enables a large number of small companies and sole proprietors. The four largest players account for only a small portion of industry revenue in 2012. Industry concentration has increased over the past five years as the number of firms operating in the industry has. Many large firms have purchased smaller operators over the past decade to increase their geographic reach and selection of service offerings. For example, the acquisition of Roadway Express by Yellow Corporation to form YRC Worldwide Inc. in December 2003 increased industry concentration overall. Along with consolidating firms, employment has also fallen over the period due to decreased demand. However, conditions are projected to improve slightly over the next five years. As the economy recovers, the industry is expected to grow along with disposable income and, therefore, demand generated from manufacturing and retail spending. Additionally, diesel prices will cause growth in the five years to 2017 as companies heighten fuel surcharges to offset costs, though profit will eventually diminish.
For more information, visit IBISWorld’s Local Freight Trucking in the US industry report page.
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IBISWorld industry Report Key Topics
Operators in this industry provide general freight trucking over short distances. General freight companies handle a variety of commodities, which are generally palletized and transported in a container or van trailer. Local general freight trucking companies usually provide trucking within a metropolitan area that may cross state lines, and the trips are generally same-day return.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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