Carriers to Continue to be Conservative in Replacing Fleet Equipment
January 23, 2013
In essence, smaller carriers will be relying on older equipment which has higher maintenance costs and is more prone to poor CSA road inspections. "We believe as profit margins improve that there will be significant demand for new fleet assets to replace the aging equipment in today's fleets," states Richard Mikes, TCP partner.
The survey also found that almost half of the carriers do not plan to add any capacity in the coming year, the highest percentage since this question was initially asked in August of 2010.
Smaller carriers were more adamant than larger carriers in their outlook to not add capacity in the next year - 60% compared to 43%. This clearly reflects the apprehension apparent in rate and volume expectations. "Capacity additions have been constrained for some time and linked to shippers' desire to add dedicated capacity to assure service. Overwhelming new orders have been for replacements, particularly with increased maintenance costs and breakdowns experienced with post-2007 EPA engines by carriers," remarks Mikes.
With rates remaining stable, costs going up, and an inclination to not add capacity, it's not surprising that over half of the carriers surveyed report they are not getting an adequate rate of return to invest in newer, more expensive equipment.
A slight majority of the larger carriers (51%) say they are getting enough returns to justify reinvesting in equipment, compared with only 40% of the smaller carriers. "Well-managed carriers with adequate profit margins will continue to grow and gain market share," summarized Steven Dutro, TCP partner. "Carriers with declining profits and aging fleets should consider if, and when, they should reinvest in their business, or if the time has come for an exit."