Trucking industry evolving amid supply chain and labor crunches: Uber Freight Co-founder

Uber Freight Co-Founder Bill Driegert joins Yahoo Finance Live to discuss the shortage of truck operators, Uber Freight highlights, the decrease of long-distance hauls, and how COVID-19 has impacted the trucking sector.

Video transcript

- Freight trucking is seeing higher demand for services prompted by growth in online shopping. But a shortage of truck operators in particular has the industry exploring all options in the search for new drivers. Uber Freight Co-Founder Bill Driegert joins us now. Bill, great to have you here with us on the show today. Uber Freight just published a recent analysis and report on the freight trucking industry. I would love to get your major takeaways and the key highlight from that report.

BILL DRIEGERT: Yeah, as you touched on, so this morning we published our market insights report for the second half of 2021. This report brings together our own in-network data as well as broader macro trends to examine what happened in the second half of 2021. Some of the key themes were this ongoing driver shortage, as you mentioned, as well as a shift in trucking employment. We've actually seen a surge of new trucking companies entering the market.

Also we touched on the ongoing surge in consumer spending, which is driving elevated rates in the trucking market. And so this report is really for our carriers and our shippers to inform them and to give them some insight into what's going to happen in 2022.

At a high level, the first thing is we are seeing this rising consumer demand that is driving an ongoing shortage in terms of capacity. What we saw through the pandemic is over $2.5 trillion in excess consumer spending. And all of that excess money has been funneling into retail spending. Personal consumption expenditures hit a record annualized run rate of $16 trillion in August and kept rising through 2021.

We also saw record retail sales holding at 20% above pre-COVID levels, which set an all time high in October of $565 billion. And of course, that drove port congestion, and we've also seen, as a result of all of that consumption, particularly in electronics, this ongoing chip shortage, which directly hit trucking because it's resulted in a 19 month delay in new truck orders.

- I mean a, 19 month delay is pretty significant. Bill, when you look at the study, the good news is that the demand is there. The bad news is you don't necessarily have-- not you, but the trucking industry doesn't have the labor supply, especially with long distance hauls. What are you seeing on that front, number one? And number two, what kind of business opportunities does that open up for Uber Freight?

BILL DRIEGERT: Yeah, correct. So long distance trucking, which represents over 34% of trucking employment, is down 3% since pre-COVID. Drivers are also working longer than they ever have before. So the average week for drivers is now 44 hours, compared to 41 pre-COVID. And ultimately what we're seeing is drivers prefer to stay close to the home. So those local delivery and warehousing jobs that have exploded because of e-commerce are very attractive for drivers.

We are very excited to see, on the other side, the DOT and the DOL enact legislation to open the door for apprenticeship programs for younger drivers starting as young as 18. That won't directly benefit us at Uber Freight because we work directly with the carriers. But it will drive relief for those carriers that we work with. And more capacity in the market, of course, is beneficial to the total ecosystem.

What we are seeing, though, is a huge surge in new carrier registrations. This is probably the best market ever for an entrepreneurial driver to enter and have success. And us at Uber Freight, it's been a focus for us. We've definitely laid the groundwork for that entry. But what we're seeing is an 85% increase in new authorities year over year from 2021 to 2020. And 2020 was already a record year.

That translates into 110,000 new drivers entering the market. And they're entering the market because they see an opportunity for higher income. And these are typically drivers that are coming from big carriers. So drivers typically enter the market with the big carriers. They get some experience under their belt. And then they see this opportunity to go out on their own, to start a carrier, to make more money. And this is the best market ever to do that.

And companies such as ourselves are really opening the door for them to do that because they can come in the market, they can immediately plug in to a product like Uber Freight and see the benefit and have access to freight and start their business.

- Certainly. And Bill, help us quantify the number of drivers that would be necessary in order to kind of fill the gap here between the demand in the industry and being able to meet that demand with the service supply that's necessary.

BILL DRIEGERT: Yeah. So we're talking hundreds of thousands of potential drivers needed in the market to fill that gap. So today, there's over 3.5 million drivers in the trucking industry. It's one of the largest employment sectors nationally. That translates to about 1.5 million registered carriers. But that's across all sectors, including things like dump trucks and other commercial sectors. Within the freight trucking industry itself, though, you're talking it's hundreds of thousands of drivers driving this gap.

- And Bill you mentioned the record number of registrations you're seeing among new carriers. I imagine the incentives are pretty hefty, just given the demand that's in the sector. What kind of wage growth have you seen?

BILL DRIEGERT: Yeah, so I talked to a carrier the other day who said that 75% of their drivers are now over $75,000 a year. That was a key metric that he shared. We are seeing drivers and offers coming in at over $100,000 for new drivers. So it's a fairly significant increase because you see rates have increased over 30%, 40%, 50% since we started the pandemic. And that, of course, has been driving higher wage opportunities.

And for us, that translates to new authorities because what's happening is those carriers are not raising their wages as fast as the market is moving. And so of course, drivers are seeing that opportunity to enter and start their own business. And again, this market is just ripe for entrepreneurial opportunity for new drivers to enter as carriers.

- What's the take rate for Uber Freight at this point, even as you're seeing some of the new drivers enter in?

BILL DRIEGERT: So as an intermediary, it varies by market conditions. So we commit to a rate with big shippers. And then we purchase it in the open market with our carrier base. So over 70% of our carriers are these new owner operators. And when they enter the market, they don't have a lot of opportunity. And this is one thing that's been a priority for us since we started, was providing transparent upfront rates so that those owner operators can make better decisions.

So an owner operator comes into the market, they can download our application. They can see a rate. They can cross off that with other providers. But they now have information. They have power to make better decisions, which creates a more sustainable market, because not even eight years ago, if they wanted to find a rate, they had to pick up the phone and start making phone calls. And that's not how the market operates today because us and others have really opened it up.

And so as a result, drivers have a lot more leverage in that interaction than they did 5, 6, 10 years ago. And that, I think, has also laid the groundwork for the surge and new authorities entering the market. And so ultimately, we provide them access to freight with large shippers, the largest shippers in the US and North America, that otherwise they wouldn't have access to.

And so our take rate is the difference between what we ultimately get from the shippers and what we pay the carriers. But it really varies in the market. And in these times with tight capacity, carriers have a lot more leverage because ultimately there's a shortage of capacity. And so shippers are willing to pay for that because shippers need to move their goods.

- Bill, everything you're telling us here is that there are improvements in place. There's tools in place. But it's not moving along quickly enough to address the shortage that exists in truckers right now. So if we're already talking about significant delays, how much worse is that likely to get if this demand keeps up?

BILL DRIEGERT: It's-- there is relief. So we are seeing drivers return to the market and carriers return to the market. In fact, driver employment has been rising steadily since we saw the low kind of right after in early 2020, kind of post the initial surge. So it's hard to predict the future in terms of what's going to happen across this year. We still are in a very tight capacity situation. But we are expecting that we should start to see some relief.

Sustained rates ultimately do drive more interest in the market. And of course, where the DOL are making some great policy choices and decisions and prioritizing how they approach and relieve some of the supply chain pressure-- I mentioned the apprenticeship program.

But they are looking at bringing more pools and more of labor and more capacity into the market in ways of driving out reach, speeding up the onboarding process in terms of registering and getting your CDL, and programs like the apprenticeship program, which open up the driver population by moving that driver age, the eligible age, lower.

And so I think those sorts of moves are will accelerate relief. Ultimately, the market will bring new drivers in, as the high rates are driving high wages, which will drive new talent to the market. But you also historically have just the constraint to get a CDL. It takes 160 hours of training to get a CDL. It's expensive. It's thousands of dollars of investment for an individual driver.

Large carriers make those investments. But as an individual, it's hard to make that choice when you have other job opportunities for which you can just walk in and start working. And so to make those policy shifts will also open up the door for more drivers to enter the market.

- Well, Bill, we hope to have you back on the show again soon with an update, hopefully with some progress there. Bill Driegert, Uber Freight Co-Founder, good to have you on today.