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.
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|
|Ryder Supply Chain Systems||
|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.
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.