Why the Trucking Industry has Seen Lower Profit Margins

The trucking industry, as a whole, is one of the biggest industries in the United States, representing over 80% of the nation’s entire freight bill, according to industry data from the American Trucking Association (ATA). In 2016, the industry generated $738.9 billion in gross freight revenues (primary shipments only) from trucking, and 10.55 billion tons of freight (primary shipments only) were transported by trucks, representing 70.9% of total domestic tonnage shipped. Essentially, if an item is on the shelves of a store or in someone’s home, it was probably on a truck before it got there. However, while the trucking industry is shipping billions of dollars of goods around the country each year, the profits coming in from those shipments don’t exactly reflect those of a billion dollar industry.

Trucking is an industry with high costs, many of which get higher each year. Equipment, licensing and insurance costs are some of the most common costs that transportation companies have to manage. Another notable expense for the trucking industry is taxes. According to the ATA, commercial trucks, which make up 12.8% of all registered vehicles, paid $18.7 billion in federal highway-user taxes and $22.6 billion in state highway-user taxes, in 2015. On top of that commercial trucks pay upwards of 24.4¢ in federal fuel tax for each gallon of diesel fuel and at least 27.4¢ on average in state fuel tax for each gallon of diesel fuel.

The second biggest expense for transportation companies is fuel costs. According to the American Transportation Research Institute (ATRI), fuel costs accounted for about 21 percent of carrier expenses as of 2016, and diesel prices have been steadily increasing little by little over the last year. The overall average U.S. diesel price for the entirety of 2018 is forecast to be $3.12 per gallon. This is quite a significant rise when compared to 2017’s average cost of $2.65 per gallon for the year and $2.31 average for the year in 2016.

The biggest expense in the transportation industry right now is, undoubtedly, labor. In order to combat the growing truck driver shortage, transportation companies have had to pay their drivers higher wages. While paying truck drivers more money isn’t necessarily a completely negative thing – it can actually help companies secure more loads, provide better service to customers and retain the best drivers – this increased cost further eats away at already-thin profit margins.

Despite these setbacks, insurance agents can actually help their commercial transportation clients save money and increase their profits. One way to do this is by offering comprehensive trucking liability coverage at competitive prices. Over the past two years many carriers have exited the trucking market or changed their underwriting appetite for certain risks, but agents who work with reputable wholesalers can help to encourage safety, growth and of course profitability in the industry once again.

About American Team Managers Insurance Services

Founded in 1998 by Chris C. Michaels, American Team Managers Insurance Services (ATM) has provided wholesale and MGA services to more than 5,000 independent insurance agents throughout the United States. Our goal is to establish close, long-term relationships with our agency partners and insurance carriers and provide competitive products for the Exclusive and Non-Exclusive markets that we serve. For more information on our products and services, give us a call at (714) 414-1200 to speak to a representative.