In this month’s edition of the People First Newsletter, we look at the trucking industry and its potential comeback push following a period of revenue decline for major players across the industry. The sprightly Spring season is underway, but the same cannot be said for the trucking industry, which continues to stumble through a freight winter.
China's increasing nearshoring investment in Mexico has piqued the interest of the Mexican government and major Chinese businesses. If the current presidential debates are any indication, we might witness significant investments in this area. And, of course, we can't ignore the elephant in the room: electric trucks.
The trucking industry usually starts to ease in May, when the weather in major parts of the country starts to improve. As harvest season picks up in the South, you can expect an uptick in revenues and operations. This means more demand and higher transportation costs.
However, despite the natural effect of the May weather on transportation, the trucking industry is still having trouble finding a way out of the decline that has plagued the industry recently. Reports from RXO, C.H. Robinson, and more appear to show that the industry boom experienced by trucking and 3PL has peaked. And the industry is now experiencing a turnaround. Some experts believe it is about commencing.
Despite the earnings report that had investors searching for a sign of life, the two companies mentioned above enjoyed a stock upshoot, showing there might yet be hope for the industry. In Florida, one company wasn’t so enthusiastic. According to a Worker Adjustment and Retraining Notification filing on May 1, the Florida-based Raven Transport Holding Inc. announced that it will shut down its over-the-road and dedicated fleets.
The closure of the two fleets, a significant event in the freight industry, will unfortunately result in the layoff of 83 employees, including 57 truck drivers, from Raven’s facility at 7150 Phillips Highway in Jacksonville.
Officials for Raven Transport said its closure is permanent. However, no reason was provided for shutting down the OTR and dedicated fleets. Thanks to these setbacks, the trucking industry's transportation jobs will decline for the first time in six months.
According to the April Bureau of Labor Statistics report, truck transportation jobs fell by 300 to 1,557,800. The good news is that it marked the seventh consecutive month of a relatively small movement in the total employment number following two years of wild swings driven by the pandemic. Outside a gain of 4,100 jobs in March, every other change in those seven months was fewer than 2,000 jobs. However, the big loss of more than 31,000 jobs last August when Yellow closed still hasn’t been replaced.
As the U.S.-China trade war continues to escalate, many businesses in China have found a way to circumvent the bottlenecks set up by the U.S. government. And they are not letting up from the looks of things. Mexico has become a key channel for these businesses to get into the U.S. without much hassle. They set up manufacturing plants and factories in Mexico and then take the goods into the U.S. as Mexican products.
Mexico’s agricultural exports recorded a 9% increase year over year. However, since the U.S. is a major importer of these agricultural products, the country recorded an increase in imports, totaling $8.1 billion for the first two months of the year. According to the U.S. Department of Agriculture (USDA), exports from Mexico to the U.S. are expected to top $47.2 billion in fiscal year 2024, which is 5% higher than fiscal year 2023.
In January and February, Mexico's top agricultural and beverage exports included beer ($1.06 billion), tomatoes ($630 million), tequila ($621 million), avocados ($594 million), strawberries and raspberries ($531 million), and peppers ($427 million).
Major players are noticing. Major Chinese businesses are boosting their investments in the country, causing a nearshoring boom that has come to the Mexican government's attention. The issue was a hot topic during the recent presidential elections. All candidates promised to increase investments and government spending to ensure the government could tap into the nearshoring boom. However, it is difficult to say how long the U.S. government will allow these to last and if they will/can do anything about the recent Chinese activity across the border.
In April, we saw electric trucks haul standard cargo across the U.S.-Mexican border. The trip was through the Port of Entry at Otay Mesa, which connects Southern California to the city of Tijuana, Mexico. More importantly, it was the first of its kind and potentially a sign of many more to come. California has a bold goal to see zero-emission in transportation across the state by 2045. And the state is not making any apology for it. With moves like this, it is a pointer that it could well achieve that by the time 2045 rolls around.
It could be smoother on the federal level. While the Biden administration has committed to decarbonizing trucking, it acknowledges that this endeavor will be costly. That said, the administration reassures it will provide substantial support through subsidies, bringing it closer to cost parity.
According to estimates, a new Class 8 diesel truck costs roughly $180,000 compared with up to $400,000 for a battery-electric truck.
However, in a significant move, lawmakers initiated a process to counter the Biden administration's recent drive to electrify the trucking industry. This was marked by a crucial hearing on Capitol Hill, which aimed to bring to light the hurdles in establishing an electric grid capable of meeting the zero-emission timeline set by federal regulators in late March.
The hearing, held by the House Transportation and Infrastructure Committee's highway subcommittee on April 30, 2024, was a precursor to the much-anticipated introduction of a Congressional Review Act joint resolution of disapproval in the Senate on Wednesday.
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