FMCSA new authority approval at record high from spot rates and tight capacity
The Federal Motor Carrier Safety Administration is setting records. New motor carrier authority approvals are at an all-time high — around 10,000 each month. As of September, around 82,000 approvals for authority had been granted in 2021, compared with 59,500 for the entire year of 2020.
Why it’s important:
- High Spot rates combined with a capacity crunch nationwide are causing an upswing of new entrants into the market.
- More authorities can indicate an increase in driver supply to offset demand for freight to be moved.
- Digital load boards and freight brokers have lowered the barrier to entry, providing greater visibility on rates and reducing risk, making it easier to go it alone and navigate the markets.
But wait, there’s more:
- It is not clear whether increased authority approvals are expanding truckload capacity, as that data isn’t available.
- Greater competition: Avery Vise, FTR vice president of trucking, said, “Fifty-two percent of approvals are for one-truck carriers, and 29% are for two-truck carriers. The entire for-hire trucking market, excluding parcel, has seen a 3% market share toward carriers of under 100 trucks since March 2020.”
The bottom line:
- These authorities could represent company drivers or lease drivers becoming owner-operators, with the potential for greater competition with larger carriers.
- There could be a delay before these authorities add to truckload capacity; some brokerages have 6-to-12-month authority requirements before working with a new carrier.
- Keep an eye out on brokerage carrier data by age of authority to see if this will translate into more opportunities for customers and brokerages.
- Large carriers could see a greater percentage of lease and owner-operators in their fleets, leading to greater savings in employee costs and higher income from selling lease drivers’ used equipment.
Should I stay or should I go? Federal Appeals court puts hold on Vaccine mandate
On Saturday, the 5th U.S. Circuit Court of Appeals issued a stay, placing a hold on enforcement of the COVID vaccine mandate until further review. Previously, the OSHA-issued mandate was set to begin Jan. 4, 2022, requiring workers for employers with 100 or more employees to get vaccinations or produce a negative test on a weekly basis.
Why it’s important:
- The original draft by OSHA did not have an exemption for truckers; however, the American Trucking Associations interpreted comments by Department of Labor officials as saying those rules will not apply to most drivers.
- If this mandate goes into effect, there will be a rush to get protocols in place for weekly testing while on the road, in addition to increased costs associated with compliance.
What’s the risk:
- Research published by Cowen & Co. warned that lack of a written exemption for trucking could cause approximately 20% of drivers to leave the market.
- Truckload Carriers Association Chairman Jim Ward wrote: “A larger fear is that a rule requiring a vaccine or weekly test could lead to a massive driver exodus from this great industry. Already faced with a shrinking pool of drivers from COVID-19 itself, we are all confronted with the pervasive challenge of locating qualified drivers to deliver our nation’s freight safely, effectively and efficiently.”
- There is a greater risk to larger fleets, and trucking companies with over 56 tractors, which make up roughly 1.3% of fleet count but contain over half the total tractors.
Wasson’s take:
- Driver turnover projections associated with a vaccine mandate can vary wildly, with some arguing 10%-30% possible for trucking companies with more than 100 employees. If a large fleet suffered an extreme turnover of 10%, there could be disruptions across the entire network, causing service delays and creating additional recruiting or rehiring costs, or losses associated with repricing the network due to less capacity in use.
- Imagine an over-the-road fleet of 2,500 trucks losing 250 within a few weeks. It would cost over $1.2 million to recruit, hire, onboard and train those drivers, given an average cost around $5,000 per driver hired. Additionally, carriers would have to continue making payments on the unseated tractors, compounding the losses.
- I would keep a close eye on vaccine regulatory news, since we’re in uncharted territory in terms of projected versus actual impact from a Jan. 4 implementation.
- An interesting strategy would be increasing agent carriers or owner-operators as a way to circumvent requirements.
- Overall, imposing this mandate would heavily impact large carriers and cause minimal disruption to carriers with fewer than 100 employees.
Market Update: FMCSA data on total for-hire interstate fleets and tractors by fleet size
The top 1% of trucking companies by size control over 50% of the total tractors on the road. Any changes in the economy, such as supply chain disruptions, can cause an outsize impact on their service levels and directly impact my ability to buy a Thanksgiving turkey.
The Routing Guide: Links from around the web
- Why I’m not Twitch Famous: Live Streaming games is hard work (The Wall Street Journal)
- Watch out, Tesla; Ford stock closed above $20 for the first time in 20 years (Bloomberg)
- Move over, Henry Thoreau; China’s rural TikTok craze has influencers working off the grid for their expensive branding partnerships. (Rest of World)
- Tim Ferris interview with Chris Dixon and Naval Ravikant on crypto currency (Tim Ferris Blog)
- If you get bored, 1.8 terabytes of police helicopter surveillance footage leaks online; zoo live feeds collectively panic. (Wired)
- Long read: The great Mcdonald’s rebellion of 2021 at Bradford, Pennsylvania (Washington Post)
