Transportation Exchange presented by Rush Truck Centres of Canada
If you’re in the transportation industry, the Transportation Exchange podcast is for you. Listen in for insightful conversations with industry leaders covering what keeps us moving, from equipment and maintenance for fleets to new and upcoming regulations and opinions on the industry as it stands today and the road ahead.
Transportation Exchange presented by Rush Truck Centres of Canada
2025 Mid-Year Industry Update with James Menzies
James Menzies, Editor of Today's Trucking and TruckNews.com, returns to unpack the key forces shaping the trucking industry mid-year. From rising equipment costs and unpredictable tariffs to the freight recession's impact on rates and replacement cycles, James offers grounded insights into how fleets are navigating today’s uncertainty. We explore the stability of the medium-duty market, challenges tied to new EPA regulations, and how shifts in EV policy may slow, but not stop, adoption. With 2026 approaching and pre-buy questions mounting, James weighs in on evolving equipment trends and what the remainder of 2025 may bring.
Hello and welcome to another episode of the Transportation Exchange podcast presented by Rush Trucks and Canada. I'm your host, jason Cuddy, and joining us again today is Mr James Menzies. Welcome back, thanks, jason.
Speaker 2:Always good to catch up with you.
Speaker 1:Yes.
Speaker 2:So we are back again, as we normally do. We're halfway through 25, which is hard to believe. Welcome back. You know, things change and it becomes very difficult to predict what's going to happen to the market. So we'll do our best. You know it is a half year point. I think this is the year that we thought we're going to get some kind of return to normal.
Speaker 1:And that hasn't been the case. No, exactly. So I guess we'll start where we normally start. Well, you know, trailers is, as usual, the leading indicator of the industry. What do you see out there?
Speaker 2:Well, if it's a leading indicator in the industry, then it doesn't look great.
Speaker 2:I'd hate to be selling trailers right now because of course they contain a lot of steel and we know that steel and aluminum are heavily tariffed by the US. I think it's at 50% now. It changes regularly and trailers are one of those things that if a fleet's going to be cautious with their spending, they might want to run those trailers an extra couple of years or an extra few years, especially if they're not putting a whole lot of mileage on them, because the freight markets are in the toilet. So trailer sales are really down for all right across the industry. Right, and it's been tough for the trailer industry, as fleets sort of sit on their hands and figure out where the market's going and they're trying not to spend any more money than they have to. And again, you know you get to the point with a Class 8 truck where you just have to replace it because it gets so expensive to maintain, whereas trailers you can sometimes refurbish them or hang on to them a little longer, and I think that's what we're seeing in the marketplace.
Speaker 1:Yeah, I'd say so. That's kind of the trend and that definitely ties into what we're seeing. You know, on the retail side of the Class 8 side it's quiet.
Speaker 2:I think for the same reason you know there's just. This year was supposed to be the year that the freight markets bounced back and it was supposed to be a great year for Class A truck manufacturers, of course, because we had these looming emission standards in 2027. And they were going to add a lot of cost to the Class A truck prices and fleets were going to rush out and refresh your fleet and buy all kinds of trucks before those emission standards came into effect and refresh your fleet and buy all kinds of trucks before those emission standards came into effect. However, with the new administration in the US, while they haven't exactly killed those regulations yet, they're expected to do so and they said they're going to reassess them. So I think that eagerness to replenish the fleet before 2027 has kind of evaporated, meaning again, fleets are sitting there sitting on their hands, wondering when's the freight volume is going to return.
Speaker 1:Right, yeah, and I think a lot of them are. It's a guessing game, like I know, even from the dealership side. You know, the unfortunate side for us is it's hard to advise the customers because you don't know what's coming next, Right? So we thought, okay, you know there's a potential tariff coming in on the materials, so maybe try and get an order in before that. And then there was the risk of it being tariffed coming across the border and then if it was made in Mexico and coming into Canada, was it okay versus coming in from the US? So there was so much uncertainty that, I think, to your point, everyone just kind of put a pause until it could figure out what's actually happening. And we're still in that pause Because, like you said, steel and aluminum has gone up, so are we going to see another surcharge bump in that?
Speaker 1:What else is coming down in the next half of the year? No one knows right. So it's hard for fleets who replenish on a certain cycle and especially, as you said, rates are down, to invest in new equipment right now where there's so much uncertainty. Other fleets have a certain buying power or buying pattern, so they will just obviously procure as they need to, but that may slow down too. But the uncertainty part is the hard part to make a proper business decision on what to do with equipment.
Speaker 2:It is very difficult to understand the impact of these tariffs because a truck, as you know, it's got many different components on it and those components are manufacturers all around the world, so it really doesn't even matter so much where the truck itself is built. Where are all those individual components that are also being tariffed coming from, Right? So it's very difficult for a buyer right now to get their head around. How much more is this going to add to the cost of a new truck?
Speaker 1:And I think the other part that makes it a bit more challenging versus the COVID time. So, covid, obviously you couldn't get equipment, but then obviously there's a huge surcharge in all the different costs. So a lot of companies ran to trucks longer and would just keep repairing them. Now, same philosophy, but to what you just said, the parts pricing has increased, right, so yes, you're offsetting the potential bump in cost of the new equipment, but in doing so your running costs of maintaining that it's gotten extremely more expensive. Just because the parts are, with all the different tariffs on all the different parts, is rising. That cost as well.
Speaker 2:So this one, it's harder to kind of win that battle than it was, say, five years ago, sure, and the other big difference between now and COVID is coming out of COVID there was a freight boom Right, so those fleets were willing to pay more money, whether it be used trucks or new trucks, they were going to pay whatever it took, because they had so much customer demand that was pent up demand. We don't have that freight boom right now. In fact, we have the opposite. We've been in the longest lasting freight recession in history. It's in its third year and we're starting to see a lot of bankruptcies, and maybe that's what has to happen in order to bring more balance back to the market.
Speaker 2:A lot of those companies, like some of those companies that were formed during COVID or really grew aggressively during COVID, are struggling now Great, and they're falling by the wayside. Finally, lenders are coming and they're saying you know, it's time, we're not going to let you, we're only going to give you so much rope. Yes, and they're starting to repossess those units and shut down those companies. For the stronger companies with good cash balances, that's good news. It has to happen, even though it's always unfortunate to hear about because it always affects drivers.
Speaker 1:Yeah, it's hard to see the drivers get affected by it. But obviously the way certain companies have been structured and what's happened in the last handful of years, it's starting to crack and I think, to your point, the carriers that run a certain way, that have always been the market norm, are happy to see these companies go and that obviously will hopefully bring the rates up as they move forward right. So it's kind of the changing of the guard it needs to happen in industry to kind of bring the rates up, get the market stabilized as far as that goes and have, you know, proper carriers out there running and then look forward to growing the economy.
Speaker 2:Sure, and I mean the effect that the tariffs have had on freight volumes can't be overstated either, because you see a big boom when the tariffs are announced, to get ahead of the tariffs to get the warehouses stocked, and then when the tariffs are sometimes reversed and taken off, well, now those warehouses are stocked and freight dries up because you don't need that influx of freight coming into the ports and then from there by truck inland. So you know, my hats are off to any fleet manager right now who can make sense of this and keep their business running efficiently. I think for now most of them are just trying to keep the lights on and trying to get through it.
Speaker 1:Yeah, it's been the biggest challenge and I think, you know, the medium duty market is usually not as affected as much. You know, I think from our end it's quiet but it's. You know, some of the smaller trucks seem to still be cycling through that that small retail piece where you know the mom-and-pop shops, you know they it's a couple trucks in their fleet, so when those trucks go down they're replacing them, right kind of thing. So it's a different, different purchasing mindset, but so that kind of is, you know, separate of what you're seeing on the rate side.
Speaker 2:But yeah, yeah, and that's what I see too. In terms of the medium duty, volumes and order activity, it's not as volatile. Um, those are business tools, you know, for the landscaper, he needs a truck to get his equipment or she needs her truck to get her equipment from to the job site, you know. And when that truck breaks down it needs to be replaced. So it's not a matter of necessarily having trucks that you could park against the fence when you, when things get slow right. So you know medium duty. I think I would agree with you. It just looks from the stats. I've seen that that's been steadier, not strong by any means, but steady yeah, I think it's the best way to put it.
Speaker 1:Yeah, um, and I, you know, you, we touched on the tariffs and market uncertainty, you know, and what we're seeing, especially on the us side, is, you know, I guess old regulations or old rules have become brought back to life with some enforcement, maybe touch base on kind of what you're seeing. That creates again a bit more uncertainty, not so much in the market as far as rates, but maybe what may affect drivers and certain carriers running into the US and even some certain states within the US.
Speaker 2:Well, the US is dealing with a big problem right now with Mexican drivers who are operating illegally within the country committing cabotage, and so they're looking to crack down on that, and one of the ways that they're doing it and something that has a lot of Canadian fleets really concerned is they've dusted off a rule that's been around for over 20 years, which requires professional truck drivers to be proficient in English. What they've done differently, though beginning June 25th actually, is when they're going to start enforcing this they've rewritten the out of service criteria. So now a driver who can't communicate well in English is going to be placed out of service. Gotcha, and that's fleets really concerned, as drivers really concerned, because you know what's the standard going to be. The FMCSA put out guidance, but it's heavily redacted because they don't want to give away the the secrets of how they're going to. They're going to measure, but will the driver who passes the test with an enforcement officer in upstate New York have the same experience in southern Alabama? We don't know. We don't know how much discretion will be up to the enforcement officer and how we'll assure consistent application of the rule. And when a driver is placed out of service because he's not proficient in English, well, it's not like a headlight that you can replace at the side of the road, or you can't get a bald tire replaced and be on your way. That driver's stuck there, he's out of service or she's out of service. So that's going to cause a lot of concern for police, because then they're going to have to send someone else who can speak better English there to rescue the driver, the truck, the load. And how much teeth is this going to have? How much enthusiasm are the enforcement officers going to have to draw this line on the sand and enforce this?
Speaker 2:It remains to be seen, and I just think it makes a lot of drivers very nervous because it's something that they haven't really, even though you had to speak English. Previously it was just a citation and now there's going to be a series of tests. Apparently, the first test will be verbal. They'll have to be able to correspond with the enforcement officer verbally. Following that, there'll be an oral test and if the officer is still uncertain, there'll be a sign test, where they're going to have to make sense of and read signs, presumably that have quite a bit of text on them we're not talking about stop signs and yield signs.
Speaker 2:So I think that we have a lot of new Canadians as drivers. Of course that don't. You know, english isn't their first language, and they could get caught up in this. Even French Canadian drivers, you know they might not be fluent in English, and then you put them right in front of an enforcement officer who's demanding them to take a test orally. You know, no matter how good your English is, you're going to be nervous, yeah for sure. So I think that's something that will be interesting to see how it plays out. Maybe it'll be no big deal. There's been some talk in the States that this is going to take all kinds of capacity out of the market and drivers aren't going to be able to drive there, and it's going to be good for freight volumes. I don't know if that's necessarily true, right, but it'll be interesting to see just how aggressive they are with enforcement of this.
Speaker 1:Yeah, I mean it's something new and different that you know it's been on the books for years but it's, you know, basically switched and turned on and the the hard part will be the discretion right because it's exactly up to the enforcement officer, and so that that's the hard one where you want to have like some sort of baseline. Obviously, you know everyone kind of would know the baseline because it's written, but how much is enforced will be.
Speaker 2:It will be the tricky part yeah, yeah, it'll be really interesting over the coming weeks to see how much we've heard anecdotally from Canadian fleets that have even had drivers turn back at the border due to language issues, right, and that's a completely different issue because that's border protection, that's not CVSA, right, but there's just this general sense of protectionism in the US that didn't used to exist, that we have to be mindful of Fair, fair, fair and then other changes I guess that we're seeing happening quick.
Speaker 1:I mean a little bit in Canada here, just with companies kind of leaving the market. But you know, ev technology it's still very front and center, it's obviously a big piece of the industry. But you know there's ever-changing unknowns with the EPA and in-carb regulations and how strong is that agency in driving kind of what they've driven the last, you know, five, seven years?
Speaker 2:Yeah, that's really interesting because of course, the EPA in the US is dialing back its regulations when it comes to truck emissions. It's interfering with CARB's ability in California to create its own rules. It wants one national set of rules, which I think the industry wants. That might slow demand and uptake of electric vehicles, but nothing's happening in terms of the technology curve right. In fact, internationals, you know, just came out with a class 8 electric truck and these are all global manufacturers and they're not changing their view of zero emissions trucks just because of what's happening in the us. Because, you know, in canada our, our regulations haven't changed, europe's haven't changed. So I think you're going to continue to see that technology advance and you're going to see the batteries become more energy dense. You're going to see weight come out of those vehicles. They're going to get better, which is great. You might see the uptake slow a little bit because they still are considerably more expensive. We had good news on that just recently, in about mid-June the ECO Camionage.
Speaker 2:I apologize for my French but that program which incentivizes the purchase of heavy-duty electric trucks. It had run out of money very suddenly. It was probably poorly managed. A lot of people buying pickup trucks got in there somehow and it was drained of funds. It's just been cashed up again and we don't know how much is going to be dedicated to the incentives for heavy-duty trucks, but at least it's going to be enough because some fleets were sitting with electric trucks on the dealer lots and weren't taking delivery of them because they couldn't get that government funding. So the fact that that's back is good news for Quebec and I think we'll still see Quebec and BC sort of lead the uptake in Canada and private fleets Private fleets I mean you see a lot of those companies that aren't necessarily doing it for the cash ROI, they're doing it for other reasons, for marketing and for relations with their store owners, trying to get them to adopt electric vehicles and put in charging infrastructure and branding, and for drivers, because drivers really like them.
Speaker 2:So I don't think the technology is going anywhere but I think the uptake might slow. And you know, for the class eight manufacturers that have been around and have the dealer networks, they can wait, they can play the long game because they sell diesel trucks and that's where they make their money and 99% of the market is still diesel.
Speaker 2:Who it might hurt is some of the startups, and we're already seeing that. We're seeing companies like Nikola go bankrupt and they're in hydrogen and EV and some of the other companies that need ev to come along, because that's all they're in. Right, they're gonna. They're gonna have a hard time surviving, but I think that the incumbent oems are gonna do just fine yeah, I agree and I don't see but the regulations changing.
Speaker 1:I mean they had you know different criterias and you know quotas they had to hit for selling one of this. You know the credit system so you know that that takes a little bit of pressure off. That does go away. Uh, you know specifically, obviously in california, but obviously other states are going to try and adopt some of the carb stuff so that will make it easier to continue selling the diesel product because that was a big concern with, you know, being able to move stuff around and and just overall, just production. How do you manage that right? So that takes a little bit of pressure off and hopefully some uncertainty of how you know how you're going to grow that. But I agree with you, I think the technology will just keep growing and growing and this may help the. This may give it a bit of time for the infrastructure to try and catch up with the technology so that the regulations aren't so far ahead of what's capable out in the market.
Speaker 1:So hopefully, this might be a little bit of a good. I don't want to say reset, but kind of like a weight shift to kind of match what's out there.
Speaker 2:Yeah, it's not going to go away. Any fleet that's already made the investment in charging infrastructure and putting those chargers, they've made that investment and that's a long-term investment. So they're not going to get rid of these trucks. They're not going to stop investing in the technology. It's just those that haven't yet dipped their toe in the water. They might take a little bit. They might just wait a little longer until freight is a little more consistent.
Speaker 1:Yeah, speaking of freight, you dabbled quickly on. You know we've been in. What are people kind of seeing or projecting potentially of an uptick?
Speaker 2:Unfortunately, the most recent reports I've been reading are that this freight recession is probably going to carry into next year because of that uncertainty that we've already talked about and the changes in freight flows. You know, the fleets that are going to be the safest and probably do the best are those that have multiple locations on both sides of the border. They can reallocate some of those trucks and if cross-border dries up because of the tariffs, they can do more domestic and whatnot. It gets trickier for smaller fleets that are dedicated to one particular lane or one particular commodity. So I think that just has a lot of fleets nervous.
Speaker 2:Nobody is calling for a freight boom right now. In fact, there's just so much uncertainty and so much nervousness in the market that the most forecasters that I watch are saying, okay, this freight recession is probably going to go into 2026. Now, right, and this again, as we said earlier, this was a year that was supposed to normalize. Yes, so I I wish there was better news on that front, but, um, you know, I I don't see many, many bulls out.
Speaker 1:I see a lot of people that are pretty bearish on the overall market going into next year, fair, and it kind of ties into when we talked, you know, even last year. Beginning of this year, you know, 26 is going to be a pre-buy. And if not towards the end of this year, the 26 model year, especially with the EPA emissions and the engine price increases.
Speaker 1:But you know, with EPA changing and maybe it won't be as stringent as long as well, with the freight recession, you have two kind of perfect storms to basically, you know, mitigate this, this pre-buy so far, and we pre-buy for a while.
Speaker 2:I mean, we don't even know if there's going to be these costly new emission standards coming in in 2027. So yeah, um, yeah that that, uh, and you know what I feel okay about it because people a lot smarter than me were also saying that there was going to be a good year for for emission or for pre-buying equipment. So it wasn't just us that got tricked by that.
Speaker 1:That was a bit of a head shake yeah, so it's in for you and the emission piece would be. I mean, obviously the oems are far along with the engine technology, so the technology is going to change and obviously it'll be a price bump on it. But it's all the. I think the other factors are tapped onto with the extra warranties and the other things that you're being forced to take in 27 that you didn't have to.
Speaker 1:Right now that may go away, which hopefully for the fleets, as it does get introduced if it does, at least it's not this huge, massive spike in cost. It'll be kind of just slight, slight increments, which would be much better to absorb.
Speaker 2:Yeah, I mean I feel for the OEMs, they've already invested millions of dollars, if not billions of dollars, to reach those targets, because you don't just flick a switch, no, when there's a new emissions regulation in 2027, you spend years getting ready for it. And they've done that. They've done the work, they've made the investments. Now how do they recoup those investments if there's not that increased sticker price, right?
Speaker 1:yeah. So it'll be interesting where that plays out. But it's, uh, you know, as we've seen here, just even at that dealership level, like there's, I wouldn't say an uncertainty on our end, but just to just know direction or decisive, it's just no direction or decisive, it's just, you know, right now we just keep doing what we're doing, but we're not seeing anything yet, you know, indicating massive prices increase or anything, because everyone's waiting for EPA stuff.
Speaker 2:I think that's the same model for everybody in the industry right now. Just keep doing what you're doing. Yeah, and you know it's all about survival and keeping the lights on for now.
Speaker 1:Fair, All right, so then you know. The million dollar question question is what is the? What's the rest of 25 look like dare we even hazard a guess?
Speaker 2:yeah, a lot of it is going to be dictated by the us government and their policies on trade, right and um, you know, we, you can't really make sense of it. It changes so quickly. And, um, you know, we have a new government in canada too, which is sort of you put a reset on relations with the us, true, so it's very difficult to to predict. I mean those, the, the tariffs. Now, the most damaging ones are on steel and aluminum, and if you're steel and aluminum hauler, that's a death sentence. Yeah, but they could be lifted tomorrow, so it's very difficult to hazard a guess. You know, as I said before, most forecasters are not predicting any big freight recovery this year, so that's probably going to have to wait. But will another shoe drop? I mean, I guess that's the bigger concern. Will tariffs be extended to other products that aren't currently being taxed at the border?
Speaker 1:So what do you think? I think the best answer is we don't know, yeah.
Speaker 2:I think we have to go with that because it's just unpredictable right now.
Speaker 1:And you know, in 24 years of covering the industry I've never seen it so unpredictable, yeah, yeah, and it's just unknown what happens, you know, between the different trade regulations, everything. So as those get hammered out and I'll give some clarity and, you know, get some agreements in place and hopefully I'll give some certainty to to the market and to the pricing, and then to the rates, and then to the equipment and it'll start to trickle through. So you need the market to kind of just settle and have some certainty and then people can then make proper business decisions at that point and there could be some good that comes with this.
Speaker 2:Now there's been a lot of talk we've been talking and trucking for years now about the need to improve or get rid of interprovincial trade barriers right and improve trade from province to province. Finally, that's being given some attention. Yeah, and that could really help trucking, because trucking is one of those industries where there's there's 10 different sets of rules. If you're going to go to coast to coast, right, and if we can eliminate some of those trade barriers within Canada, that'll help on the domestic front. And finally, for the first time, it seems like they're serious about addressing that yeah, it seems to be.
Speaker 1:I mean, the different provinces have been talking and kind of making some agreements between themselves, but it might help from a national you know footprint to actually have that in. So, yeah, if there's any good that comes out of all this chaos, that hopefully will strengthen the Canadian economy and, you know, for the carriers that do run across the country, maybe this, this is a boom for them potentially as we move forward.
Speaker 2:And we've. We've also talked in the past about how resilient the industry is. You know, that's the one thing that's remarkable about trucking it's resilient. It's been through challenges8, 09, COVID. They always survive, they always find a way and I'm sure this time they will as well, I agree, yeah, it'll.
Speaker 1:it'll keep keep on trucking, yeah. So anyway, thank you for joining us again today and providing us the you know a look of where we are so far and potentially where we're going. You know the great unknown, but it's for sure All right. Well, that concludes today's episode. To catch past episodes, please check out transportationexchangepodcastca. Until next time, thanks for watching.