As the transport market is increasingly competitive, participating businesses can use new existing technology and significantly increase the efficiency of their services to continue in operation.
With the volatile economy of 2020 flowing over to this year, companies have unequal investment trends based on which consumer segments they are serving. Investment in Equipment and Software (E&S) plummeted in the second quarter of 2020 by 27.7 per cent (annualized).
In the second half of 2020 and by 2021, E&S investment is expected to return to positive territory.
In 2016, truck transport added more than $150 billion to the gross domestic product of the U.S, according to Statista. The only company that made over $60 million in sales in the same year was FedEx, the largest freight transport firm.
The main emphasis is on serving the e-commerce industry for logistics firms. Fred Smith, FedEx’s founder, anticipated that the industry would expand by 26 percent by 2018 to almost 2.4 trillion dollars.
Let’s have a look at what lies ahead for the sector in 2021 and beyond
Rebounding Segments, Quicker Recovery
Vertical segments, especially aircraft, are likely to remain weak because of the market mobility stalemate. In the meantime, other vertical segments, including tractors of Class 8, other industrial machinery, and medical equipment, have a chance to rebound more strongly by 2021.
The stronger recovery for transport fleets stems from many of the reopening schemes for the region, which have put a heavier emphasis on carriers and shipping traffic, which have placed more kilometers on trucks on the roads today.
This will boost truck replacement and acquisition strategies by 2021 and will constitute a significant choice for many businesses.
According to ACT Research, preliminary orders for North American Class 8 heavy-duty trucks rose 60% in September 2020, relative to the previous month and up 145% in comparison with the previous year. They continued to report that an unforeseen perfect positive storm in late spring and summer, after the initial shock of the COVID-19 shutdowns and other mitigations efforts, resulted in strong upgrades to commercial vehicle sales.
Driving demand for food, retail, and health products
Now that the replacement of older vehicles with larger, reliable trucks has become so important, company owners and fleet managers have important choices to make as they go into 2021 to structure the funding for this replacement equipment.
For one thing, transport fleets place more miles on their vehicles and handle more deliveries on items from food orders, health care, and hygiene to daily commodities now ordered online.
According to research firm Edison Trends, total spending on Amazon.com during the latest two-day Prime Day event rose 36 per cent from its promotional day last year. Before that, eMarketer projected Amazon to hit a peak of $6.17 billion in total revenue of Prime Day.
Trucks will also have an important part to play in the carriage of COVID-19 products in the coming months. Pfizer Inc. is only one of many firms that aim to distribute their drugs to millions of Americans.
Keeping an eye on the costs
This suggests that companies are constantly monitoring the cost effect on their transportation bottom line posed by operational costs, fuel, and maintenance and repairs, as trucks are vital to their distribution channels.
Regardless of the price of diesel, more companies are now changing their trucks’ life cycle to benefit from new units with greater fuel economy and total ownership expense. A new truck life-cycle study indicates that operators are saving TCO $16,856 for a first year as they are transitioning from a model-year 2016 sleeper model to a model 2021.
The enhanced fuel efficiency of newer vehicles – even at low fuel costs – is an important justification for updating a fleet, not to mention increased climate preservation and carbon mitigation.
How critical is it to find any chance to reduce costs? UPS Inc. has also mentioned supplying more orders because of increased online purchasing, but delivery expenses have also increased.
The group posted an increase of almost 16 percent in sales in the third quarter and an increase in profit of 11.8 percent, but also a substantial degradation of its huge domestic market due to recruiting, shipping costs, and a significant increase of $179 million in spending to speed up delivery times.
Future preparations
While several businesses focusing on the food delivery industry have seen years of banner expansion, not all carriers have seen gains in 2020 and their fleet business and the uncertain economic climate pose major challenges.
Many organizations, such as manufacturers supplying restaurants that eventually had to shut down, had to reduce their fleets because of a slowdown in economic operations. In reality, over one-quarter of managers surveyed in a recent industry survey (27%) said that their fleets have decreased and new industry programs, which help companies expand their fleets accordingly while infusing their activity with much-needed cash, have been launched.
These groundbreaking services will continue to represent companies that are not yet able to compete for their upcoming truck sourcing plans, which will potentially start to bounce in 2021.
A couple of thoughts from us…
Transport companies should use new technologies and techniques to enhance performance and mobility by increasing the expenditures of transport companies (for diesel, vehicle components, etc.). They should also follow the modern developments in the transportation industry, look forward to and be prepared to invest in smart devices and the deployment of advanced technologies to make delivery easier.
How are investors deciding where to invest?
In determining the feasibility of transport infrastructure programs, a country’s social-political landscape is a key element. A certain amount of political stability is required to attract private contractors and investors. Until the economy makes investments possible, the money needed will go elsewhere. If there is access to funding, and an unclear, chaotic, and contradictory policy system may cause enormous risks for the timely and projected delivery of transport infrastructure projects. Delays or overruns in costs may threaten the project’s financial viability.
Investment requirements in transport differ greatly between countries, ranging from developing brand new networks to renewing and/or improving existing facilities for transport. These various types of ventures demand different amounts of funding and therefore, varying in appealing to international and domestic buyers.
