ATRI’s analysis on the operational costs of trucking in 2024

Jason Cannon:
CCJ's 10 44 is brought to you by Chevron Delo, heavy duty diesel engine oil. Now there's even more reasons to choose. Delo

Matt Cole:
Trucking in 2023 was as expensive as ever. How is 2024 shaping up?

Jason Cannon:
You're watching CCJ's 10-44, a weekly episode that brings you the latest trucking industry news and updates from the editors of CCJ. Don't forget to subscribe and hit the bell for notifications so you'll never miss an installment of 10-44. Hey everybody, welcome back. I'm Jason Cannon and my co-host is Matt Cole. The American Transportation Research Institute's annual operational cost of trucking report has shown for the last three years in a row, costs continue to increase, keeping them at record highs

Matt Cole:
After jumping nearly 40 cents in 2022, the cost per mile to operate a truck in 2023 increased another 2 cents, bringing the total average operator channel cost per truck to $2.27 a mile. This week we welcome back ATRI Senior Research associate, Alex Leslie, who talks about the 2023 operational cost of trucking and offers some insight into what ATRI found in the first couple of months of 2024.

Alex Leslie:
No two segments of the industry experienced the same cost trends. Some sectors had higher wages in LTL, for example, but other sectors, the wages only went up by a little bit. Insurance went up across the board in truckload, but not so much in other carriers or truck and trailer purchases went up in certain fleet sizes, especially the larger ones, but not necessarily the smaller ones. So it was a year where trends really diverged and the challenges and opportunities really varied depending on what part of the market you're in.

Jason Cannon:
Just looking at average operational costs, 2023 ended up being almost the same as 2022. A big part of that though was the big decrease in fuel prices last year. From the record highs that we saw in 2022 without fuel costs were up fairly considerably from 2022.

Alex Leslie:
Yeah, we saw the average per mile cost go up to $2 and 27 cents or $91 and 27 cents per hour. So if you include fuel and that number does include fuel, that's just a 0.8% increase. But fuel was one of the biggest changes this year. We saw that go down by 13.7%. Fuel was so high in 2022 with all the geopolitical turmoil that when those prices came down, that sort of drove the overall cost down. But if you take fuel out of the picture, you get a more useful account of what has been happening, which is that prices excluding fuel actually went up by 6.6% to a dollar 71 per mile. So again, it seems if let's just look at it with fuel, maybe not so bad of a year, but fuel kind of is deceptive when you take it out. There was much more cost increase than I think certainly we hoped and probably what even a lot of us expected.

One of the biggest ones was truck and trailer payments. It was up by 8.8% in 2023, which is substantial, but that's only about half of what it was in 2022. So the increase was still significant, but the rate of increase was not nearly as much as the previous year. So a little bit of a silver lining there, but it was a bit of a wild card. Still, we saw a lot of larger fleets making purchases and actually expanding their fleets, so they tended to have higher costs and then the used market prices have come down, which was beneficial to smaller fleets who buy more off the used market. But it really also depend on whether a fleet was paying off overpriced equipment from 2021 and 2022 still right fleets that were able to avoid that historically hot truck market. They're mostly doing all right right now on their per mile truck and trailer costs, but gosh, any of those fleets that had to make substantial purchases during that really hot truck market, they continue to pay those overpriced payments in 20 23, 24, and some of them even will continue to be paying those in 2025 and 2026.

Matt Cole:
As Alex mentioned, no two segments were the same when it came to cost in 2023, he explains where it was most expensive to operate after a quick word from 10-44 sponsor Chevron lubricants.

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Alex Leslie:
The less than truckload sector saw some of the greatest increases and the highest overall cost per mile per operation, and that was partly because that sector has in 2023, seen so much disruption, obviously with the exit of yellow from the sector. That opened up a lot of potential for expansion, for grabbing new customers. It also meant that there were a lot of drivers up for grabs, so we saw that actually the biggest contributor to wage and benefits cost increases were from that LTL sector as a lot of those fleets were buying up yellow drivers that had been sort of let loose on the market. So it was sort of an interesting trade off there. LTL costs did go up by quite a bit, but at the same time, a lot of those fleets were pulling in more revenue and were expanding, so a lot of them saw strong profits, which was not true for other sectors.

Jason Cannon:
ATRI earlier this year also asked fleets about their early year numbers to help identify an outlook for the remainder of 2024.

Alex Leslie:
For the most part, a continuation of the trends that we saw in 2023. So it does look like there's a bit of continuity. Finally, after so much irregularity repair and maintenance costs, we saw just up by a couple percentage points in those first two months of 24, which is pretty consistent with what we saw in 2023, they were up by about 3%. Tire costs actually dipped a little bit, which again is pretty consistent with 23 when they only went up by just a little bit. One of the big increases continues to be insurance costs. Actually, this is kind of a sort of story that's been unfolding over the last several years. When we had the pandemic in 2020, there were so many fewer cars on the road that we had a lot fewer crashes in the large truck space, which was good. It meant that insurers were actually able to make profit in the commercial auto sector for the first time in almost a decade, and then as a result, insurance costs remained relatively flat in 2021 and 2022. But unfortunately in 2023, that party sort of ended and costs went up by about 12.5% in 23, and in 24 it looks like we're going to see if not quite at that level, something similar. They're certainly still on the rise, and again, it's partly a correction from those couple years where we saw them flat, but at the same time, there were fewer crashes in at least preliminary FMCSA numbers in 2023. So that's always disappointing when you see the costs go up, even as the fleets are technically getting safer. Beyond

Matt Cole:
The overall trend for 2024, actually specifically looked at several areas, the first of which was driver wages.

Alex Leslie:
So the overall that we saw in 2023 was that wages went up by about 7.5%, but a lot of that was driven by LTL wages. Really, when you look at just truckload, for example, in 2023, we saw driver wages only going up by about 3.3%, which for comparison inflation during that same period was 3.4%. What we're seeing is a moderation in driver pay increases. They're still keeping up with inflation. They're still moving upwards certainly, but the double digit increases that we saw in 2021 and 2022, those do seem to be a thing of the past. So we anticipate that in 2024, those average driver pay costs will continue going up, but probably at a moderated amount even compared to 2023, especially as we see the total number of employed people in the industry continue to dip downwards this year. Now, of course, if there is some kind of substantial improvement in the freight markets at the end of this year, that could give a little bit more upward momentum, but right now we're not seeing something at that scale.

Jason Cannon:
The report also looks ahead at repaired maintenance costs, truck payments, and more for 2024

Alex Leslie:
Repair and maintenance and tires costs. We see continued moderation in those areas. Certainly are indicators for the start of 2024 and some of the other data that we consult as well suggest that those should continue to moderate. Truck and trailer payments continues to be a little bit of a wild card like it was in 2023. So much depends on the purchasing decisions that a fleet made during that hot market in 2021 and 2022. Used truck prices have come down to a much more historically expected level. They may continue to come down a little bit more, but one of the big surprises really of this report this year was that we found most fleets are actually continuing to expand, or they were at least through 2023, despite the soft freight market, we saw fleets increasing their truck count by a little over 4% on average and increasing their average mileage by a little over 3%. So that is continuing to drive truck sales and truck costs. Now, that has cooled off a bit more in 2024 than in 2023, but I suspect that that will still be a factor, especially for larger fleets that are looking to position themselves to take advantage of when the market does begin to rebound and having that capacity.

Jason Cannon:
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