Why is intermodal (Truck-Rail-Truck shipping) more important than electric semi-trucks?
There are safety reasons to invest in autonomous technology, and there are climate change implications for electric trucks, but the best way to evaluate this is the same way investors do—by looking at the economics. Intermodal (IMDL) is almost certainly a better place to put your money than investing in electric semi-trucks. At least, that’s where Warren Buffett has put his money.
According to the American Trucking Association (ATA), in 2022, the U.S. spent over $940 billion on trucking—80% of the nation’s total freight bill. Also from the ATA, this pie chart shows the breakdown of what the marginal cost is for each $1 of that revenue.
From a financial standpoint, intermodal service is important for the same reason investors find autonomous and electric trucks attractive: labor and fuel costs. In total, 68 cents of every dollar spent on trucking last year can be attributed to driver wages/benefits and fuel.
Simple math—round up to $1 trillion. As labor represents 40% of trucking costs, you’re looking at a growing $400 billion market. For fuel, at 28%, it’s a $280 billion market.
Investment is coming to those areas because that’s where the money is. Capital is chasing its share of that spend.
Intermodal—replacing the middle miles between origin and destination with rail—addresses the same cost structures as electric and autonomous vehicles. A single IMDL train can move a line of containers over 3 miles long with a 2-man crew and use 80% less energy than trucks per ton of freight carried while doing so. By any conceivable metric, intermodal is already more efficient now than most new “disruptive” technologies will be 10 years from now.
Putting the economics aside, moving freight over rail also carries many of the social benefits promised by electric and autonomous trucks: supporting the environment and improving road safety.
Please read the next blog post to learn more about some of the social benefits of moving freight by rail.
This blog post was adapted from a presentation given in November 2023 at Loyola University Chicago. For the full original presentation, you can watch it on YouTube by following this link: https://www.youtube.com/watch?v=dV3NocGBszU.