More than 31,000 freight transportation companies folded during the first quarter of 2023, and the vast majority were small operators.
Based on Federal Motor Carrier Safety Administration data and an analysis by Avery Vise, VP of trucking industry data at FTR Transportation Intelligence, upwards of 79 percent of fleet “revocations” were one- or two-truck operations. Many of these small startups are thought to have jumped into the owner-operator game when spot rates were high and diesel costs hadn’t yet skyrocketed.
“As COVID shut down jobs and stimulus money entered into the economy, demand increased for all kinds of goods. Trucking responded with record growth of new trucking businesses in response to that demand, which is now cooling off,” Owner-Operator Independent Drivers Association director of public relations Norita Taylor reportedly stated.
Falling rates and high prices at the pump appears to have led 24,806 one-truck companies to either fold or lease their rig out to a large freight carrier. Spot rates at the end of the first quarter of 2023 were down 70 cents per mile compared to a year ago.
“Yes, the raw numbers are high, but not unexpected given the unprecedented scale of carrier creation during that two-year period,” Vise reportedly said. “I believe that, had we not seen the steady relief in diesel prices that we’ve seen since they reached a record in June of last year, the level of failures actually would have been substantially higher.”
The FTR Transportation Intelligence official also noted that 42 trucking companies with 100 or more rigs folded up shop. Only seven shuttered during the same period in 2022. By that same token, the overall truck transportation sector continues to thrive. From January through April 2023, 25,536 for-hire startups entered the industry.
While the industry experienced a net loss of 5,744 outfits, it onboarded more CDL holders and set month-over-month records for employment. Things may be tight for small businesses, but no one is necessarily losing gainful employment.
Vise also went on the record predicting the decline in spot rates had hit bottom. That means mom-and-pop operations can anticipate rate stability in the coming months. And owner-operators who leased out their rigs may see opportunities to go back to working for themselves.
Other industry insiders are pointing to “seasonality,” a period marked by spot rate recoveries that typically begins in late May. Regardless of whether spot rates pivot or truck diesel continues to drop, truckers thinking about becoming owner-operators may want to keep their powder dry a tad longer.
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