Inventory Shortage Continues to Disrupt the Auto Industry
The COVID-19 pandemic has affected numerous industries and led to several issues, including a vehicle shortage that has rocked the automotive industry. To combat financial loss due to global shutdowns, dealers pushed incentives and financing offers to encourage buyers. Once government stimulus checks were distributed, consumers were more than happy to invest in new and used rigs. While this feeding frenzy helped dealers keep their heads above water during the stay-at-home orders, they didn’t anticipate a global microchip shortage that would cause significant production delays upon reopening.
With this supply not keeping pace with demand, and manufacturers prioritizing smaller vehicles for individual buyers, commercial fleet operators are left feeling the sting from this shortage. So, what can we expect moving forward? Let’s find out.
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What’s causing the vehicle shortage?
There are a few things responsible for the current state of the automotive industry. For starters, the microchips used in many vehicle components are manufactured overseas, with Taiwan contributing 63%, South Korea at 18%, and China at 6%. With the world being globally affected by the pandemic, many manufacturing plants ceased production until cases slowed down. Natural disasters have also impacted the domestic inventory. In February of 2021, Texas was forced to halt production and close a Samsung plant due to severe freezing.
Aside from the microchip insufficiency, dealers have also played a role in this vehicle shortage. At the start of the pandemic, many sellers struggled to move inventory due to quarantine restrictions and stay-at-home orders. Instead of losing their businesses, they chose to offer extreme incentives and too-good-to-be-true financing plans. Unfortunately, they kept these deals running for a little too long, and their inventory was cleared out or severely depleted. And before the stock was able to circulate back into the lots, the semiconductor shortage hit and took down new vehicle production with it. So, where do we go from here?
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How is the auto industry responding?
As we navigate the lingering effects of the COVID-19 pandemic, manufacturers and the U.S. government are working to solve this shortage issue. Below, we will break down their plans.
- Automaker Action Plan: Currently, automakers are working to fulfill dealers’ needs and buyers’ wants by continuing to build out vehicles and forgoing the components that require the semiconductor microchip. Manufacturers are also allocating what they have in the way of microchips to high-demand vehicles and adjusting the availability of certain automobile features, packages, and options. While this action plan offers some much-needed relief, it is not enough to solve commercial fleet operators’ problems.
- Government Action Plan: Fortunately, the U.S. government recognized the geopolitical nature of this scarcity and acted early in resolving the issue. With the majority of the microchips being produced in China and Korea, our government needed to invest in domestic semiconductor production to regain the upper hand in inventory levels, which is precisely what they did. The U.S. Senate passed a $190 billion legislation package to compete with foreign tech, with $54 billion allocated to domestic manufacturing of semiconductors and telecommunication equipment. While the bill still needs to survive the House of Representatives, President Biden has voiced his support for the bill.
When will fleet inventory return to normal?
Within the first half of 2021, auto sales have mostly recovered despite the technology shortage. Unfortunately, the sales of commercial vehicles have not responded in the same manner. So far, only 14% of vehicles were sold to fleet consumers. Now, automakers are having to prioritize microchip distribution to recuperate inventory levels. Many are allocating supplies to higher-end models and leaving commercial operators at the mercy of a waiting list.
Moving forward, it’s unlikely that we will ever surpass the industry’s previous standards or return to normal inventory levels. According to industry insiders, the microchip shortage could last another four months, and while recovery efforts are vast, they’re not enough to meet the ever-increasing demand. However, companies and manufacturers are predicting supply improvements by the first quarter of 2022. While there is no sure way of knowing the exact numbers, operators should be prepared to face this shortage until 2023.
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In mid-May, a cyber attack on the Colonial Pipeline shut down fuel delivery to a large part of the Eastern United States. Gas stations across that particular part of the country reported greatly reduced supplies and, in some cases, complete outages of fuel. This shortage resulted in long lines at those gas stations that still had fuel, along with limitations on how much gas consumers could purchase at one time. While the cyberattack was an isolated incident and resolved in about a week, the outage had an undeniable effect on consumers.
In particular, it raised and re-raised ongoing concerns about how the trucking industry’s struggle to transport fuel—due to a lack of drivers and a rise in insurance premiums—has impaired the industry’s capabilities.
The Colonial Pipeline shutdown received national attention, but many areas already suffer from gas shortages that can raise prices for all consumers. This shortage has nothing to do with consumers but more about the lack of available truck drivers who can haul fuel combined with irrational consumer behavior. Let’s look at this challenge to try to figure out some possible solutions.
Understanding Fuel Challenges
The nation relies on truckers to keep gas stations regularly filled, but the ability for truckers to do so has decreased due to several reasons. The COVID-19 pandemic accelerated several of these trends.
With more people no longer commuting to work and a drop in vehicle use for things like vacations, the demand for gasoline was cut in half in April 2020. This lack of demand forced some drivers in the fuel-hauling sector to either change to more stable routes or leave the industry altogether.
The U.S. Bureau of Labor Statistics estimated that the trucking industry lost 88,300 jobs during this time, adding to the tens of thousands of driver vacancies already in place. The driver shortage created a difficult dynamic. While trucking companies surely utilized fewer drivers during the pandemic, they now find themselves struggling to refill those voids as fuel needs again increase. After all, it is not like there are drivers simply sitting at home waiting for an assignment. The fuel-hauling fleet finds itself desperately in need of drivers without enough interested applicants.
Additionally, a Truckload Carriers Association poll found that insurance premiums skyrocketed an average of 15% for members last year. For some smaller carriers, this increase forced them to shut down, further lowering the available driver pool.
Potential Help on the Way?
The DRIVE-Safe Act, a piece of proposed legislation that if passed would incorporate more safety technology into driving, has brought hope to some in the industry.
The act includes several mandates that would improve the overall safety of truck driving—and experts believe this could entice potential drivers. Some of these mandates include apprentice programs for commercial driver’s license holders under the age of 21, active braking collision mitigation systems, forward-facing cameras, adaptive cruise control, and speed governors.
These technologies not only make driving easier, they exonerate drivers during accidents. Young people are more accustomed to devices tracking their activity and may be intrigued by the “gamified” experience fleets can create.
The act will also help put to bed the notion that truckers work incredibly long hours on the road without rest. Instead, prospective employees will know they can expect to work in a highly regulated and safe environment that puts them and their safety first. This will help alleviate some of the problems truckers face.
Supply & Demand of Gasoline
The price of gas traditionally increases at the beginning of summer as fuel companies provide a different blend that produces less smog. This change, combined with more motorists on the road taking vacations, reduces the overall supply and can cause prices to increase. The price of fuel stayed relatively low and stable last year as drivers largely remained at home during the summer months. Historically, though, this time of year has featured higher prices.
As some states like Colorado complain of shortages now, the reason comes more from consumers than supply. While there are fewer truckers on the road, there is still enough gas for those wanting to fill-up. The problem occurs when drivers anticipate a shortage and fuel up before their tank is empty, leading to a rush at the pumps.
Until more truck drivers return to the road, this will be an ongoing problem. For motorists, the key is to only fill up when necessary and avoid purchasing unnecessary fuel that will not be immediately used.
Why Transportation Funding Requests are the Highest
Congressional lawmakers submitted nearly $2.8 trillion in total requests for infrastructure projects to the House Committee on Appropriations at the end of April. These requests stem from the limited return of earmarks, which the parties agreed to earlier this year.
These requests should come as no surprise. Political leaders have long championed infrastructure projects as a way to provide for their constituents. Infrastructure projects are geared to benefit a majority of the community and provide a tangible accomplishment for politicians’ time in office.
Overall, transportation earmarks dominated spending requests in this latest cycle. Spending for labor and health projects was second at $832 billion, followed by interior at $697 billion. It is likely this is just a starting point as more transportation projects will continue to be proposed.
Let’s look at some of the biggest transportation infrastructure projects lawmakers would like to undertake in the coming year.
This massive project will one day span more than 2,400 miles from Texas to Canada. It currently features multiple disjointed sections, bringing in concerns regarding its safety and efficiency. One of the significant needs for the project is a bridge over the Ohio River that would carry a planned I-69 extension between Evansville, Indiana and Henderson, Kentucky.
Both Kentucky and Indiana have pledged to spend $850 million on the bridge but requested federal funding to speed up the process.
Hudson River Tunnel
Politicians in New York and New Jersey have long fought to get funding to repair the existing tunnel, which was damaged by saltwater intrusion during Superstorm Sandy in 2012. Local leaders argue the cost is more than the two states can afford and need help from the federal government, which has, at times, supported and rejected the project. An environmental impact statement is expected to be finished soon and could give new life from the project, something Transportation Secretary Pete Buttigieg has signaled as a priority.
The collapse of the I-35W bridge in 2007 remains one of the most harrowing disasters in recent memory. That bridge collapsed during rush hour traffic, killing 13 people and severely injuring countless more.
The American Society of Civil Engineers gave America’s infrastructure a poor grade and identified 46,000 bridges in deteriorating conditions. Approximately 600 of those bridges are in Minnesota; these need restoration and repairs to withstand the harsh weather and ensure another accident never happens again.
Along with repairs and maintenance, there are funding requests for more ambitious projects. One is a hyperloop in the Midwest that would use a system of sealed tubes with low air pressure to transport passengers rapidly in pods mostly free of friction. Inventor Elon Musk has championed this technology that one day could dramatically improve public transportation and reduce the burden on roads, bridges, and other forms of infrastructure.
Washington Bridges and Transit
A recent Seattle Department of Transportation report found that 65% of the city’s bridges were in fair condition and 6% were poor. Lawmakers would like funding to improve the bridges, invest in public transit and a light rail, fund infrastructure projects in small and medium-sized cities throughout the state, and improve earthquake resilience.
One important project is the West Seattle Bridge, which is the most used in the city. It was closed in March 2020 after cracks were discovered, causing a ripple effect throughout the local transit ecosystem. The results are expected to worsen as more people resume commuting to work as COVID-19 restrictions are lifted.
Finding a Path Forward
These are only a handful of essential infrastructure projects that Congress would like to complete. Major traffic centers, such as Los Angeles, Washington D.C., and Austin, have different projects in the works as well, along with major interstates such as I-95 on the East Coast and I-10 in the South.
These latest budget requests, combined with the Biden administration’s proposed infrastructure spending legislation, could dramatically change the nation’s transportation system over the next several decades.
Infrastructure spending has long been seen as a positive use of public funds. These projects help create jobs, spur future economic growth, and create long-term investment opportunities. The nation’s infrastructure has been built over the last century and needs to be refreshed for today’s current world.
The COVID-19 pandemic showed that changes would come to how people work and gather. Improved electric vehicle technology, ride-sharing, and new public transit methods will also alter future needs.
An estimated 1 out of every 3 truckers suffers from sleep apnea, a potentially dangerous condition where a person struggles to breathe as they sleep. This can lead to a host of dangers and medical issues—from feeling distracted and drowsy to heart attack and stroke.
For truck drivers and the companies that employ them, this condition can lead to larger safety concerns. To safely operate their vehicles, truck drivers need to be alert and attentive at all times. Those who drive with sleep apnea symptoms may put themselves or other drivers at increased risk for accidents as the condition can affect focus and reactions, leading to fatigue-related crashes.
What is Sleep Apnea?
Sleep apnea is a condition where a person cannot breathe properly while sleeping, causing them to wake up sometimes several hundred times throughout a night. There are three types of sleep apnea:
- Central Sleep Apnea (CSA) is when a person’s brain does not send the proper signals to the muscles that control breathing.
- Obstructive Sleep Apnea (OSA) is when a person’s throat muscles relax as they sleep and collapse, blocking the airway.
- Complex Sleep Apnea Syndrome (CSAS) is a combination of CSA and OSA.
People with sleep apnea may gasp for air as they sleep or snore loudly. Even though they can sleep for a full eight hours, the person will wake to feel exhausted as the constant interruptions impact the quality of their rest.
Sleep apnea can be incredibly dangerous, contributing to conditions such as high blood pressure, diabetes, morning headaches, difficulty staying asleep, attention problems, irritability, and others. Many times, a person will not know they suffer from sleep apnea unless told of potential symptoms—something that may be difficult for truckers and owner/operators who tend to spend lots of time alone.
Who is at Risk for Sleep Apnea?
Anyone can have sleep apnea regardless of age, gender, or ethnicity. However, there is a statistical correlation between the size of a person’s neck and their body mass index to sleep apnea sufferers.
People who have a larger neck size or are overweight have a higher chance of suffering from sleep apnea. A sleep study—done either at a sleep lab or in some cases at a person’s home—can help determine if someone suffers from the disorder.
How Do You Treat Sleep Apnea?
Once diagnosed, a sleep apnea sufferer may be prescribed one of several treatments. A Continuous Positive Airway Pressure (CPAP) machine is typically the most common remedy. This device delivers air pressure through a mask placed over a person’s face that can help keep their airway open.
Other treatment options include a Mandibular Advancement Device, or MAD, which is a custom-designed mouth guard to help keep the throat open. Some sufferers simply sew a tennis ball to the back of their sleeping clothes to stop them from lying on their back.
More severe treatments include surgery or implants, although the most common way to relieve sleep apnea is to lose weight.
What Truckers Need to Know About Sleep Apnea
Sleep apnea among truckers has been a concern for more than two decades. Some companies require drivers who meet certain criteria—either for age, body mass index, or neck size—to complete sleep studies to see if they suffer from apnea, although there is no formal regulation.
Some experts, including P. Sean Garney, vice president of Scopelitis Transportation Consulting, believe formal regulation may happen under the administration of President Joe Biden. One issue for trucking companies is the cost of sleep studies, which can be expensive both for drivers and for companies.
Many organizations have started working with organizations like SleepSafe Drivers, a third-party sleep apnea and fatigue-management service, for coaching and monitoring. With such a high number of drivers at risk for the condition, trucking companies see long-term value in finding ways to help those at risk, even before regulation makes it mandatory.
Even if a driver’s company does not require it, or if they work as an owner/operator, there is a benefit in getting tested for sleep apnea. As mentioned, several potential remedies can help a person feel more awake, alert, and calm during the day, reducing the potential for dangerous accidents. For truckers who spend their workday behind the wheel, they must do so at their full physical and mental capability for their sake and those sharing the road.
Most Americans know the American Rescue Plan as the $1.9 trillion government act that brought with it an additional $1,400 stimulus check for those who qualified. While the payments were an important part of the act, the American Rescue Plan also included funding for numerous projects and programs aimed to stimulate the economy, including billions of dollars for the transportation industry.
A Huge Payment for Public Transportation
The American Rescue Plan will provide $30.5 billion to the nation’s public transit system. This includes money to support rural transit agencies, transportation services for the elderly and those with disabilities, and transportation on Tribal lands. This money will be dispersed to public transportation operators to assist with operating costs, including payroll and personal protective equipment for essential employees working during the pandemic.
The goal of these payments is for public transportation organizations to improve operations to welcome back riders once the pandemic ends, as opposed to making drastic cuts due to the prolonged lack of travelers. Public transportation ridership dropped up to 65% (July 2019 numbers compared to July 2020), forcing many systems to furlough workers and reduce service. While ridership has increased as stay-at-home and other orders have been lifted, they are still below pre-pandemic levels.
Helping the Airline Industry Recover Job Losses
Air travel dropped around 70% during the first six months of the pandemic, forcing many air carriers to furlough thousands of employees. The Air Transport Action Group believes the pandemic has put up to 46 million jobs in the aviation and tourism sector at risk, about half of the total global workforce in this sector. While this number may be a worst-case scenario, airlines have and continue to be hit hard during the pandemic.
The American Rescue Plan contains $15 billion to provide payroll support for airlines to avoid furloughs and other staff cuts. To ensure airports can continue to function, the plan also outlined $8 billion to cover costs of operations, personnel, and cleaning. This includes set-aside rent relief and other costs for airport workers and businesses. The plan also includes $3 billion to establish an Aviation Manufacturing Payroll Support Program to protect aviation manufacturing jobs.
Amtrak Gets a Needed Boost
Just like public transportation and airlines, Amtrak was also hit hard. It was reported in November 2020 that the rail service had seen ridership drop 80 percent from year to year. The American Recovery Plan includes $1.7 billion for Amtrak to recall employees furloughed during COVID and restore daily long-distance service. The money will also help states cover revenue lost in state-supported routes.
Amtrak, which typically runs at a deficit, forced major budget shortfalls this year and discussed making significant cuts to its workforce several times.
Only the Starting Point?
While these investments will surely help the transportation industry, President Joe Biden continues to work with lawmakers on an infrastructure package that could spend another $2 trillion that will impact the transportation industry in many ways.
Some key provisions of the plan, which would either need congressional support or be included in the next budget reconciliation process, calls for $174 billion for electronic vehicles, $115 billion for roads and bridges, $20 billion to improve road safety, $85 billion for public transit, $80 billion for railways, and $25 billion for airports.
While the plan is still in the early stages and much could still change, the Biden administration has made infrastructure spending a top priority. Transportation Secretary Pete Buttigieg says the goal of this program would be to create jobs in these sectors, along with improving daily life.
“President Biden’s plan is the most visionary proposal for the nation’s transportation network since the dawn of the Interstate Highway System,” said Janette Sadik-Khan, chair of the National Association of City Transportation Officials.
A lot can still change before the infrastructure proposal becomes real. If approved, it would disperse spending over the next eight years to boost transportation-related industries. The American Rescue Plan and the Biden administration’s infrastructure proposal aim to help the nation’s transportation industry recover from the pandemic and set itself up for a lucrative future.
The COVID-19 pandemic has increased attention on the already growing need for more truck parking as trucking advocates push for federal funding to alleviate the problem. The need for safe truck parking existed before the pandemic, fueled largely by the electronic logging device (ELD) mandate that more strictly regulates the length of time drivers can work. With traditional truck and rest stops filling up quickly, truckers find themselves now parking in abandoned parking lots, on shoulder highways, and other dangerous locations.
A Rapidly Growing Problem
A 2019 survey showed there were about 313,000 truck parking spaces across the country. This included about 40,000 at public rest areas and another 273,000 at private truck stops, numbers that increased from just five years earlier (the number of public rest area spots grew 6%, while private spots were up 11%). However, the same survey found that 98% of truckers interviewed still had trouble finding safe parking at the end of their day.
This was, of course, before the pandemic started. Some private truck stops further curtailed parking to reduce the number of people on their property to limit virus exposure, and public rest stops became crowded as more people traveled in recreational vehicles to avoid air travel and public transportation. Before the ELD mandate, truckers could simply continue to travel until they found a safe location, usually away from a major metropolitan area.
Now truckers must either commit valuable driving time to planning where they will spend their night or drive around in hopes of finding a safe space to sleep. Some truck drivers have resorted to staying in unsafe locations to avoid fines and penalties for logging too much time behind the wheel. While some mobile applications have been created to help solve the problem, the reality is there are simply not enough available spaces for truckers currently on the road.
Is There Help in Sight?
Maybe. There was initial hope that funding could be included in the upcoming $1.9 trillion COVID-19 relief bill but that did not happen. Instead, the best hope for trucks is an infrastructure bill Congress will debate later this year.
Peter DeFazio, a Democrat representative from Oregon who chairs the House Transportation and Infrastructure Panel, has vowed to push for truck parking when the discussion begins on a highway bill to replace a transportation bill passed in 2015 that expires this October. DeFazio included $250 million in an infrastructure bill last year to improve truck parking, but that measure never received a vote in the Senate. Other politicians, including Mike Bost, a Republican representative from Illinois, have proposed similar measures to increase parking options for truckers.
Bost, who comes from a family of truckers, introduced a measure for the COVID-19 relief bill that would dedicate $125 million to truck parking this year, a number that would increase each year through the 2025 federal fiscal year. In the end, $755 million would have been provided to help truckers. While this measure was tabled, it provides a potential outline for what relief could look like.
The Federal Highway Administration has taken note of the problem; through the National Coalition on Truck Parking, the agency will seek to obtain initiatives that will improve parking for commercial truck drivers.
Trucking advocacy groups argue that airlines, Amtrak, and other transportation industries have received billions of dollars in aid during the pandemic, truckers have largely been ignored. The goal is for funding to create additional parking areas and forbid rest areas from charging truckers to park.
The Risks of Not Expanding Truck Parking
The trucking industry seemingly has more trucks than drivers these days. While trucking has shown to be a valuable profession, especially during the pandemic, the stressful nature of the work has led to decreased driver retention.
Truck drivers already work long hours, spend days and weeks away from loved ones, and must follow strict workplace safety guidelines to keep themselves and the roads safe. While a driver may be unlikely to leave the profession over the lack of parking alone, the daily stress of finding a spot may contribute to an overall negative feeling for the job.
The pandemic has highlighted the value of truck drivers who have worked in difficult conditions to continue delivering goods. For many, they could not even use a bathroom at their distribution center for fear of spreading the virus.
Lewie Pugh, executive vice president of the Owner-Operator Independent Drivers Association, summed up the increasingly complicated issue from a trucker’s standpoint.
“All truckers want is a place to take a nap,” he said, according to Roll Call.