Rising demand and high fuel surcharges will help revenue grow, but profit may decline
Los Angeles, CA (PRWEB) May 07, 2013
Local freight trucking has struggled in the five years to 2013. During the economic downturn, slow manufacturing production and retail spending reduced demand and hurt industry revenue. “Declining demand caused greater price competition among operators, limiting profit,” says IBISWorld industry analyst Lauren Setar. “Additionally, high diesel costs dramatically reduced profitability in 2008, even though many industry operators implemented fuel surcharges.” These surcharges increased revenue but are not sustainable in the long term because customers will seek alternative modes of transportation.
The Local Freight Trucking industry performed miserably in 2009 when revenue plummeted 20.5%. “Weak operating conditions pushed operators into record losses in 2008 and 2009, forcing some companies out of the industry completely,” says 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 estimated to fall at an average annual rate of 2.7% to $33.4 billion during the five years to 2013. In 2013, IBISWorld expects demand to recover and an increase in shipping volumes, which will cause industry revenue to increase slightly over the year.
Nonemployers comprise about 87.5% of companies in the Local Freight Trucking industry. Barriers to entry are low, allowing for many small operators to enter the industry and increase competition. These small operators were especially vulnerable to the decline in demand during the recession. As such, in the five years to 2013, the number of companies declined to 195,111 enterprises. Similarly, reduced demand has caused industry employment to fall during the same period.
Conditions are projected to improve slightly in the five years to 2018. As the economy continues to recover, including improvements in manufacturing and retail spending, the industry is expected to grow because a greater number of goods will require shipping. Additionally, diesel prices will cause growth 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.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
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
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.