Inadequate Rates of Return Keeping Fleets from Buying
July 11, 2013
Many carriers still not seeing adequate rates of return, nor any relief in their ability to renegotiate accessorial charges, according to the 2nd quarter industry survey by Transport Capital Partners.
Just over 50% of carriers surveyed believe they are getting the rates of return needed to justify further investment in new equipment. This is up only four percentage points from November 2012.
With many reporting inadequate rates of return, TCP notes that it is understandable that one-third of all carriers do not intend to add new equipment. Replacement of aging fleets remains the primary driver of equipment purchases.
“Higher equipment costs in recent years, combined with the lower utilization resulting from new HOS rules, will continue to make adequate returns on investment a challenge,” says Steven Dutro, TCP Partner.
Little Relief from Accessorial Charges
The TCP survey reported that 73% of carriers surveyed expect rates to rise over the next 12 months. However, 45% of carriers still do not believe they will be able to renegotiate accessorial charges.
Most likely in response to pending changes in hours of service, 43% do believe they will be able to address detention times.
While carriers across the board expect rate increases in the next 12 months, larger carriers are significantly more confident than smaller carriers that they will be able to raise accessorials.
Sixty-four percent of smaller carriers see no relief in accessorial charge negotiations.
In contrast, only 37% of larger carriers do not believe they will be able to renegotiate accessorial charges.
“As freight demand grows shippers who need consistent service will need to assist carriers in gaining operational efficiency and adequate compensation," says TCP Partner Richard Mikes. "Larger carriers are more confident they are positioned to achieve this customer cooperation.