The Motor Carrier Market in 2025

Written By: David J. Jencks, Esq. - Jencks Law, P.C.

The United States Trucking Sector Is Finally Poised for Turnaround

The United States economy is projected to grow at a pace of 2% year over year in 2025.  The Federal Reserve is expected to ease interest rates further into 2025 prompting industrial activity, construction, and a re-stocking of inventories. Recent natural disasters on both coasts will prompt the need for the movement of significant materials.  A steady exit of Carriers from the marketplace over the past two years has begun to even capacity.  A new Presidential administration is focused on domestic goods production and deregulation.  Do these events finally set the stage for the end of a prolonged and painful bottom cycle in trucking?

Traditional Motor Carrier Cycle

Figure 1 – The Motor Carrier Cycle

Under the traditional trucking cycle shown here, Carriers have been mired in a historically prolonged bottom cycle since approximately May of 2023.  Freight rates are at historically sustained lows (adjusted for inflation), freight volume has been tepid, and maybe most importantly during this time, a significant and persistent overcapacity in active trucks.  The freight market typically sees growth from 6 to 12 months after monetary policy and regulatory changes. This, combined with the length of the bottom cycle and typical seasonality changes, suggests a rebound in the Summer of 2025.

Positive Signals

There are emerging positive signals that an early positive cycle for trucking is on the near horizon.

Freight Volume

Freight volume ended in 2024 volatile by historical volume numbers, but consistently above the volume lows of 2023 to mid-2024 and near historic highs.  See Figure 2. 

Figure 2 – Freight Volume

The consensus of industry observers is that freight volume will see tepid growth in 2025, with an increase of 2% year over year predicted.

Truck Capacity

The fourth quarter of 2024 began to see consistent truck capacity contraction.  Experts expect capacity to continue to strengthen in the first quarter of 2025 to such an extent that freight rates are finally expected to move higher. Truck capacity may be the single clearest indicator of a shift from a bottom cycle to an early positive cycle. The Morgan Stanley Capacity Index shown here indicates truck availability for the number of available loads consistently close to even.[i] 

Figure 3 – Dry Van Capacity

[i] An interpretation of the chart is 0-1 shows under capacity (insufficient numbers of trucks for the number of available loads), 2-3 at even capacity, 4-5 at over capacity and 6 plus indicating significant over capacity.

Freight Rates

The last quarter of 2024 ended on a positive upswing. The average per mile spot rate for October was $2.02, climbing to $2.04 in November and finishing the year in December at $2.11.  The new year has brought more encouraging news with dry van spot rates rising to $2.20.             

Most industry analysts predict first quarter freight rates to continue to steadily rise due to shrinking truck capacity and economic stimuli such as lower interest rates and anticipated increased domestic oil drilling.  Generally summarized, rate forecasts are expected to spike in mid to late 2025. Dry van per mile rates have risen 10% in the last four months with many pundits predicting another 10% for the rest of 2025.  This would place rates at approximately $2.40 per mile, a level not seen since March of 2023.   

A Different Administration

President Trump plans to loosen environmental regulations and raise tariffs. These policies could slow down truck electrification and boost U.S. freight movement.  For Carriers, this likely translates to lower operational costs and an increase in freight volumes.

After the first Trump term, the Biden administration introduced significant new emissions standards, including heavy-duty greenhouse gas emissions standards (GHG3), which received resounding trucking industry criticism. The new president will likely ease these environmental regulations. President Trump has already suggested that he will roll back Biden-era environmental policies. For trucking, the result could be lower equipment costs.

The American Trucking Associations supports such measures. In a public statement, ATA president and CEO Chris Spear stressed the importance of looking at trucking related regulation. "President Trump made trucking a priority throughout his first term and partnered with us to enact policies that strengthened the supply chain, grew the economy, and delivered for all Americans," Spear said.

Remaining Headwinds

Notwithstanding some emerging positive signs for Carriers, multiple headwinds exist and indicate a slow but steady recovery to a peak cycle (see Figure 1).

High corporate debt levels could temper industrial and inventory expansion even with better borrowing conditions. Continued high costs for materials may also continue to affect businesses rebuilding inventories.  Administration policy changes toward tariffs may affect or temporarily disrupt import and export volumes.  Geopolitical instability involving the Panama Canal, the Ukraine/Russia conflict, and control disputes over the Red and Arabian Sea could also create import and export activity.

While domestic freight volume is expected to rise, and is generally positive, a 2% predicted increase in freight volume year over year is not so substantial to ensure a fast or radical change in the general freight environment.

Trucking operational costs also continue to rise. Insurance premiums rose 12.5% from 2023 to 2024. Truck and trailer payments were up 8% in 2024 primarily due to higher interest rates. Driver wages increased 7.6% in 2024 as demand for skilled, experienced drivers remains high.  Repair and maintenance costs rose 3.1% due to inflation in parts and service fees.

Carrier Needs in 2025

Carriers have deferred capital expenditures such as new, improved or more trucks and trailers for much of the last 2 years. As freight rates move above $2.30 per mile, Carriers will look to fix what’s broken, improve on existing equipment, and buy or lease more.  Carriers will also need help budgeting for and paying insurance premiums in an ever-raising premium environment.

2025 for Transportation Factors

Factors will see a 20% organic growth in average invoice size in 2025. Factors may also be faced with different underwriting and monitoring procedures if Motor Carrier numbers are eliminated during the DOT’s administrative rule making process. Factors can also expect increasing requests for overadvances and financing accommodations to pay for insurance and improve and increase fleets. Lastly, while it is dangerous to predict, and vigilance should continue, a 20% increase in invoice size, combined with more awareness and vendor support in the past year, may mean that Factors will see less fraudulent activity.

Author:

David Jencks, Esq. is an attorney that has been practicing for 25 years in the areas of transportation and transportation finance. He represents Factors and transportation companies in transactional and litigation matters. He is a member of the Transportation Lawyers Association and co-general counsel to the IFA. He can be reached at davidjencks@jenckslaw.com.