Trucking – a 650 billion dollar market ripe for disruption

Goods transportation with trucks represents a 650 billion dollar market in the US, which is about 5% of GDP. The chart below compares the trucking industry to a few other industries which really shows the massive market it represents.

3market size

Source: SELECTUSA, 2014

The 650 billion dollar is split between Truckload carriers 310 billion, Private fleets 290 billion and Less Than Truckload carriers at 50 billion dollar.

The trucking market is highly fragmented with more than 400 000 for-hire carriers and 600 000 private carriers. These companies have in total around 3 million heavy duty trucks in operation. About 97% of all fleets operate fewer than 20 trucks. On the other hand the top 10 For-hire and Private fleets have about 350 000 trucks representing more than 10% of all trucks, i.e. there is room for both SMB and enterprise plays.

Top 10 For-hire and Private fleets in the US

For Hire carriers Private fleets
Company No of heavy trucks Company No of heavy trucks
UPS

102 851

Pepsico

23 410

Fedex

81 596

Coca Cola

9 782

Swift

15 231

Sysco

9 348

YRC worldwide

14 572

Walmart

6 523

Con-way

11 800

Halliburton

6 034

Schneider

11 563

Agrium

5 828

TransForce

11 380

US Foods

5 766

JB Hunt

10 187

Schlumberger

3 942

Landstar System

8 399

McLane

3 910

Ryder Supply Chain Systems

4 201

Reyes Holdings

3 362

Sum

271 780

Sum

77 905

Source:Transport Topics, Top 100 (2013)

New truck sales is highly cyclical with about 230 000 heavy duty trucks sold in 2012 whereas only 118 000 were sold in the tough year of 2009. The average sales price for a new truck is about $115 000 making the total market size for Heavy Duty trucks in the 25-30 billion dollar range. The total aftermarket is valued at 20-25 billion annually and is naturally more stable than new truck sales.

The trucking industry is labor intensive with more than 3 million HD truck drivers and a lack of qualified drivers is an increasing problem for the industry.

A cost breakdown for an average trucking operation is shown below. This changes with type of operation but provides an idea of what costs that make up the majority. Provided that fuel makes up more than 35% of the cost it is easy to understand the strong focus on fuel efficiency in the industry.

11Cost structure

Source: American Trucking Association, (2014)

Cost pressure is a constant factor and profit margin is for most parts of the value chain counted in single digits.

Trucking – the Venture Capital perspective

As Venture investors focused on the commercial vehicle industry we meet with fantastic entrepreneurs that are moving the industry forward in different areas. A couple of areas where we see opportunities for disruptive innovation and new entrants are:

  • Market places that increase liquidity and efficiency in the market utilizing mobile technology
  • Connected services to lower fuel cost, increase safety, remotely diagnose and overall improve efficiency
  • E-commerce for parts and accessories (See previous blog post on the subject)
  • Analytics services that utilize data from the different sources within fleets to enable better decisions. This could range from what loads to accept, which routes to cover, which vehicles to purchase, how to coach the drivers and other areas that supports the operation

The trucking industry is hugely important for the economy and increased efficiency based on technology will drive the industry forward.

Bottom line, I believe there will be billion dollar companies coming out of the Trucking segment the coming five years.

Jonas Landström

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About Jonas Landström

After 5 years as an entrepreneur in a biotech start-up, I joined the dark side at Volvo Group Venture Capital. As a VC I am fortunate to look into many companies and get heavily involved in a few. I am genuinely interested in the mechanisms of efficient entrepreneurship including the engagement by VCs. I am hooked on the ideas presented by Steven Blank and Eric Ries around Customer development and lean principles.
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2 Responses to Trucking – a 650 billion dollar market ripe for disruption

  1. Adam says:

    I couldn’t agree more with the article. In fact, the one piece that have a seen a major trending increase is the convergence of data into better – actionable – decisions…
    • Analytics services that utilize data from the different sources within fleets to enable better decisions. This could range from what loads to accept, which routes to cover, which vehicles to purchase, how to coach the drivers and other areas that supports the operation
    I have been involved with the trucking & logistics market for over 20 years and I appreciate the amount of technology that is involved in the operation of an efficient fleet. However, it has only been over the past 2-3 years where multiple sources of data have been mashed together – to create a better view – a holistic view of the operation.
    An example of this would be how fleets effectively exonerate drivers from collisions that are not their fault – historically, there was a reliance on eye-witnesses – which often didn’t work in the trucking companies favor. However, now… there are vehicles sensors that provide historical data streams, videos that capture the drivers actions, videos that capture the outside environment, along with analytics that provide contextual insight into what actually happened…

  2. Jim says:

    It’s crazy that the trucking industry is worth $650billion! Glad it’s such a huge industry, but it’s a shame that theres a decline in the amount of qualified drivers.

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