Although there going to be continue changes to how freight transportation operates on a worldwide basis, there is going to be a substantial and continued demand for these services on an ongoing basis. Most importantly, the issues pertaining to automation have not yet taken complete hold within the transportation industry. The owners of these businesses will be able to integrate additional technology that will increase the profits of these organizations over time.
As it relates the strengths, trucking and transportation businesses are always able to remain profitable and cash flow in every economic climate. Even during times of economic recession, there is a substantial and ongoing demand for the delivery of packages as well as merchandise to and from wholesalers and retailers. Most importantly, online commerce activities have prompted a substantial increase in demand for trucking related businesses. The operating costs associated with these types of companies can be modified depending on the economic climate. Additionally, these businesses have tremendous access the capital given the fact that there is a substantial amount of tangible vehicles that are used during the course of these operations. Almost all financial institutions are willing to provide an expansive amount of working capital, and financing related to the acquisition of tractor-trailers.
For weaknesses, these businesses are going to undergo substantial changes over the next 20 years. Automated technology, driverless vehicles, and general changes in how the economy operates is going to impact the trucking industry. However, these risks can be ameliorated by the fact that this is going to be somewhat of a slow rollout as it relates to these operations. Nothing regarding the overhaul of a major industry happens very quickly. Additionally, one of the other weaknesses of these businesses is that they do have very high operating costs not only from the standpoint of the fuel costs but also personnel expenses as well. One of the nice things about being able to ameliorate these risks is that underlying costs relating to employing drivers can be scaled back when needed.
For opportunities, most trucking companies readily expand by simply acquiring additional trucks that can provide transportation services on a local and interstate basis. As mentioned earlier, almost all financial institutions are willing to provide business loans and leases for individuals and companies that engage in long distance freight hauling. These financial products often carry prime interest rates given the fact that all capital is typically allocated and collateralized by tangible vehicles.
For threats, these businesses are heavily subject to how the economy is doing. During times of economic recession, the demand for trucking services may decline sharply. However, an economic recession is often coupled with a substantial decline in the cost of fuel. As such, there is a natural progression to how these businesses contract and expand any qualified entrepreneur can easily manage these underlying costs so that their trucking company can remain profitable and cash flow positive at all times. Again turning to the risk of automation, for trucking company owners this may be an actual benefit to their organizations as computers and related technology are integrated into existing tractor-trailers. In fact, the rise of automation within the transportation industry may substantially boost the profits of a company that owns and operates tractor-trailers on an ongoing basis.
At all times, people are going to demand the transportation of materials to and from locations. As such, an entrepreneur that is very forward minded as it relates to integrating technology into their operations can develop a trucking company so that it is always able to produce a substantial return on investment while generating a significant amount of equity in the business as it pays down any underlying debt obligations.