The recent Third Quarter 2011 Transport Capital Partners (TCP) Business Expectations Survey found that only 5% of carriers are planning to add 16% or more capacity in the next year, down from 29% that had such plans six months ago.


In a stunning reversal from previous survey results, 73% of carriers say they either have no plans to add capacity or plan to add only 5% or less.

"The possibility of a double dip recesson, high volatility in the stock market, lack of political leadership, and uncertain regulatory and tax policies all play into this [lack of confidence in equipment investment]," says Richard Mikes, TCP Partner and survey director.

Seventy-six percent of the larger carriers surveyed expect to add less than 5% capacity compared with 67% of the smaller carriers. Clearly the capacity crunch is going to be felt across the board, if the larger carriers are not planning to add capacity.

"Last quarter's survey showed that carriers were split 50/50 as to whether profits were sufficient to justify new equipment. The continued poor economic news is likely to dampen new truck orders over the next year unless freight demand picks up," notes TCP partner, Lana Batts.

The number of carriers who expect to expand through the utilization of independent contractors has been trending down over the last year. Carriers planning to add capacity have been increasingly leaning toward company equipment, and away from contractors almost every quarter since a year ago, from 13.5% to 26.2% currently.

Likewise, fewer carriers (4.7%) indicate they would be adding capacity by purchasing used trucks this quarter, likely reflecting the scarce supply, higher mileage on used trucks, and 20 to 30% higher prices. Mikes points out.

"It appears contractors still are a constraint, used equipment is scarce, and pressure is mounting to refresh fleets rather than to grow fleets," he said.

TCP believes the truck replacement decisions are becoming more complex than ever. According to Batts, more truckers are questioning which direction to turn regarding equipment purchases.

"Since capacity is still tight in a 1% GDP growth market, fleets have to weigh increasing repair costs against higher capital demands with new trucks and technology," Mikes notes.

More information on truck life cycles is available at TCP's website.

A PDF version of the Third Quarter 2011 TCP Business Expectations Survey is available here.