Highs and Lows: What to Expect in 2021
After market conditions left the trucking industry looking down the barrel of near-record lows at the beginning of the COVID-19 outbreak in 2020, the industry made a comeback for the ages in the latter part of the year. Sales and freight rates soared to near-record highs, essentially making up for losses early on in the year.
While some may be cautiously optimistic about market conditions given the volatility the overall economy has experienced in the past year, several analysts that watch the transportation industry are ‘bullish’ on what’s to come in 2021.
As COVID-19 vaccines become more widely available, Amit Mehrotra an analyst with Deutsche Bank is optimistic that the transportation sector will outpace the overall U.S. economy due to pent-up consumer demand, continued inventory restocking, strong housing demand, among other variables.
There is good reason to believe that the best days are still to come. And, as we slowly shift away from COVID-19 response, it appears we can expect a new infrastructure bill in the near- future as well as new policies that were shelved due to the pandemic. Here’s what’s on the horizon in 2021.
Will this be the year a new infrastructure bill is passed? The new bill is estimated to be roughly $1-2 trillion, and it would include significant funding for projects that would aid in reducing greenhouse gas emissions in transportation as well as funding for road and bridge construction/repair. There is also speculation that it could include reformation that would transition from the tax per-gallon system to a tax based on vehicle miles traveled. With the current highway bill (PL 114-94) expiring in October, momentum is growing.
Every four years the American Society of Civil Engineers provides a ‘report card,’ grading the current U.S. infrastructure conditions. In the 2021 report, the U.S. received a C-. Most in the industry will agree it’s long overdue that the U.S. puts forth more of an emphasis towards improving its roads and bridges, though like most government bills that are passed, not everyone will agree with everything that is included.
Insurance liability changes:
Discussions to increase the insurance liability minimum has been a hot topic in recent years due to increasing collision repair costs and ‘nuclear verdicts’ that affect the truck insurance market. Raising the $750,000 minimum for carriers’ liability coverage is rumored to be in play.
A Federal Motor Carrier Safety Administration (FMCSA) proposal in 2016 sought to require Class 8 trucks to be equipped with speed limiting devices. In the proposal, it suggested limiting trucks to 60, 65, or 68 mph. Talks of implementing these devices have been put on hold for several years, though some suggest new discussions surrounding a potential mandate for implementing this technology could be on the horizon.
The FMCSA and the Department of Health are several years behind a 2015 mandate that would enable carriers to drug test drivers via hair instead of the traditional urine test. However, there is reason to expect that a reassertion of the statute would allow carriers to test hair follicles over urine in pre-employment drug screenings.
Since testing hair is a more accurate way in screening recent drug use compared to urine tests, fleets should be able to feel more confident in the new drivers they hire who have passed a hair test. In theory, it should help fleets hire honest and safe drivers and prevent false-negative tests from occurring. From a driver’s point of view, it might feel like it breaches personal privacy.
It’s no secret that we can expect to see sweeping changes in regard to climate policies. How that will impact the commercial transportation industry is still unclear. But it wouldn’t come as a surprise if there is an increased ‘push’ from the federal government to increase the production of zero-emission trucks (electric and fuel cell) to gradually replace diesel rigs. California already set a mandate that will require new medium and heavy-duty trucks operating in the state to be zero-emission by 2045.
While it’ll take several years for zero-emission trucks to run as productively and efficiently as diesel rigs, particularly in the over-the-road segment, progress is being made. And federal regulations that are put in place may paint a clearer timeline for truck manufacturers to produce more advanced zero-emission trucks. While zero-emission trucks are more expensive due to the advanced technology, like most products, down the road they should become more affordable. In the here and now, government is stepping up to offer grant money to help offset the high price of zero-emission technology – enabling early adopters make the technology transfer.
Hours of service:
Remember the new adjustments to FMCSA’s hours of service (HOS) that went into effect last year that provides more flexibility for drivers? The changes to the short-haul exception, which loosened restrictions for short-range drivers to travel up to a 150 air-mile radius and be on duty for up to 14 hours, as opposed to the previous rule that allowed drivers to travel 100 air-miles and be on duty for 12 hours, is now under review.
With continued progress being made in combatting the COVID-19 pandemic, it seems as if we’re not far out from returning to ‘normal’ operating conditions. The forecast for industry growth looks promising, and renewed talks for policies placed on hold due to the pandemic look to resume.