Owner Operators are Under Pressure Due to Trucking Downturn

According to the head of freight at Uber Technologies Inc., a prolonged drop in on-demand trucking prices runs the danger of driving out tens of thousands of tiny operator-owned trucking businesses that flooded the market while rates were skyrocketing earlier this year.

According to Lior Ron, CEO of Uber Freight, many owner-operators truckers would have to leave the business if pricing dropped by 10% to 20% because of rising fuel costs and a flattening of U.S. consumer demand.

According to Uber data, prices in the on-demand market, which have been stressing since early March, fell an additional $0.30 per mile in April. This was a sharper reduction than the average seasonal decline.

Ron added, “The first casualties are the small guys, unfortunately because the operational costs are higher, so they’re the first the first ones in and the first ones to go out.”

Investors are concerned about broader economic consequences if the trucking slump continues and spreads due to the unusually significant decline in the U.S. spot market, which is used to meet demand surges not covered by conventional trucking contracts.

Over 20,000 drivers have entered the market in the previous six months, particularly 9,000 in February alone, according to Uber data, drawn in by high rates and the desperate requests of transportation and carrier businesses for more OTR truckers.

Ron stated that the trucking industry was already examining the effects of the summer drinks season and the Florida produce season, which started in May, on spot rates and the availability of drivers.

Uber Freight, a go-between for shippers and truckers, paid $2.25 billion to acquire the logistics firm Transplace last year. Due to the purchase, Uber Freight’s first-quarter revenue increased to around $1.8 billion, and it first achieved profit on an adjusted EBITDA basis.