The transportation industry covers a wide array of sub-sectors, including railway, trucking, and airlines. Its market size in the United States was valued at $1.3 trillion in 2018 and the industry is expected to see a 2.9% growth in 2019. Among all the transportation segments, trucks and buses take lead in terms of technological innovations and investments from suppliers and manufacturers. The railway industry alone accounts for $81 billion in the United States. Analysts predict that revenue growth will be led by air freight and logistics services in the future.
Key Facts
- Of the entire transportation market, logistics and trucking have the largest share, making up 35%.
- The total revenue for the rail transportation industry in the U.S. make up $80 billion dollars.
- The global logistics market will reach $27 billion by 2023 with a CAGR of 7.6%.
- DHL Express is the largest international express services provider, followed by UPS and FedEx.
- The global freight volumes will increase four times by 2025, according to the Organization for Economic Cooperation and Development (OECD).
- In the shipping industry 20% of returns account for damaged products, costing up to nearly 17 times more from the original price.
- Venture capitalist investment in global logistics market amounted to $4 billion in 2017.
- Some of the challenges facing logistics market are competition, stagnant global growth, commoditization, labor costs, technology advancement, and consolidation.
- The American Trucking Associations estimates that driver shortage will be 174,000 by 2026.
- 42% of logistics carriers globally plan to use UAVs and drones to deliver goods in the future.
Transportation Digitalization
Various factors make up the transportation industry. As new technologies, increased consumer demands, and innovative business solutions continue to progress each year, operations like administration, contracting, and production have continually improved. By making services and designing products that create better vehicles, aircrafts, and ships, digitalization will substantially boost the transportation sector in the near future. The ongoing development of artificial intelligence and immersive technologies have utilized Internet of Things (IoT), robotics, UAVs and drones, and even blockchain technology.
Internet of Things (IoT)
The transportation industry has spent nearly $78 billion dollars in IoT from 2016. New technologies have helped companies map out efficient routes and maximize fuel usage, track shipments, and monitor available parking spots from afar. They’ve helped improve transportation safety by using smart sensors to wake up sleepy drivers and provide alerts for potential hazards and crashes. Additionally, IoT can monitor a vehicle’s age, fuel performances, braking, and speed systems. All this has dramatically helped passenger increase their safety and also give manufacturers ways to produce better vehicles.
Robotics
Robotics is one of the most impactful technology trends that transportation companies have utilized in recent years. One study has predicted that the robot unit shipments for the global logistics market will grow from 40,000 to 620,000 annually. In particular, robots will significantly revolutionize loading and unloading of shipping containers. The traditional method of shipping containers in America have made automation difficult. However, due to recent developments, robots can now utilize new technologies to optimize loading and unloading of products in various sizes. Robots are now working together alongside employees to assemble goods in an efficient manner.
UAVs and Drones
The UAV and drone market is expected to reach $1.2 billion by 2020 and the U.S. commercial demands will increase by tenfold in 2021. Research also shows that nearly 42% of logistics carriers globally has plans to integrate UAVs to help deliver goods in the future. Currently, Amazon Prime Air uses small drones to deliver packages that are weighed 5 pounds or less. In 2018, the global drone market generated more than $24 million in revenue. These drones could be the key to transform the global supply chain market that’s been stagnant for far too long.
Blockchain
Currently in the United States, the Blockchain in Transport Alliance (BiTA) accounts for nearly 85% of all truck related transactions. From dispute resolution to administrative efficiency and order tracking, blockchain could help solve many challenges that the transportation industry has been facing for many years. For example, with effective blockchain tracking system, the transportation industry can eliminate the $140 billion dollars tied up in dispute settlements each day. Additionally, blockchain can also validate the record of drivers, which will help carriers assign loans more smoothly. Vehicle communication is a vital part in effectively maneuvering through different parts of the transportation processes.
Investments in Transportation
Transportation infrastructure is one of the most important economic resources in the United States. As such, the national government as well as the private sector have put immense efforts in improving and investing in the transportation market. All public and private investments go into building better structure and equipment for logistics services, air delivery, freight rail, maritime, and trucking. And because there is such a variety of companies that fall under the umbrella of transportation, investors have a difficult time analyzing their performances with a standardized approach. Regardless, certain fundamental metrics put investors in a good position to select transportation stocks. They are debt-to-equity and net asset value per share. Debt-to-equity measure a firm’s financial leverage in times of economic downturn. Net asset value per share is the market value of the shipper’s assets, minus net debt, plus equity interest.
