LONDON, Oct. 25, 2017 /PRNewswire/ -- The importance of the European road freight industry is often overlooked by politicians. Instead of focusing on the economic value it contributes, the critical nature of efficient transport to European manufacturing strategies, not to mention the millions of jobs it creates, it seems that many administrators are guilty of regarding the sector as a cause of environmental or social problems rather than as an asset.
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This inevitably leads to regulation and whilst some of these measures are legitimately designed to create a sustainable industry, many can be seen as attempts to protect local freight operators from lower cost, international competition and prevent the proper functioning of the Single European Market.
The European Commission's latest 'mobility package', 'Europe on the move', is an uneasy attempt to reconcile the interests of various stakeholders in the transport industry. For example, it includes recommendations to liberalise cabotage across the region, not least due to the improved levels of vehicle utilisation this will create - vehicles involved in international movements of goods will be able to reduce empty running by undertaking more domestic
transports in a third-party country.
Greater utilization of vehicles will be good for international carriers, their customers and the environment. However, such moves are being opposed by domestic freight operators who fear being undercut by cheaper eastern European competitors.
In France and elsewhere they represent a powerful lobby group. This year's European Road Freight Transport report looks in depth at the new regulations being suggested by the European Commission as it walks a tightrope of vested interests. In addition to this, it looks at the fundamentals of the industry; its correlation to economic growth; cost breakdowns, empty running and employment structure.
It analyses a variety of industry and government statistics to give a clear view of how the industry operates and how it has developed over the past decade. The report also looks at the major problem of cargo crime in Europe and what measures can be taken to address it. Extraordinary as it may seem, this issue was completely ignored by the European Commission's proposals despite it impacting significantly in economic and social terms.
Of course, no report on the European road freight market would be complete without an in-depth examination of innovations which are, or have the potential to, transform the industry. Our analysts look at some of the key initiatives, such as alternative fuels and digital freight marketplaces, and provide their own critique of their chances of success.
Finally, a new section of the report contains a major perception and usage survey of executives involved in the European road freight transport sector, providing insight into the latest thinking and priorities of senior management.
1.1 KEY FINDINGS
• The European road freight market is made up of small, medium and large providers. Companies with less than 50 employees account for around two thirds of revenues, while companies with over 250 employees account for around 10%. Smaller companies are increasingly a physical asset resource that large network transport providers draw on, given their asset light operating strategies.
• The demand side of the European road freight market is quite predictable. European road freight market volume growth tends to be in the low single digits year-over-year, correlating strongly with economic growth and manufacturing growth.
• The supply side of the market is quite unpredictable. Proposed legislation relating to cabotage rules and socalled 'posted workers' could alter the underlying economics of road freight, while a driver shortage threatens the market over the longer term.
• Domestic road freight is associated with a much higher rate of empty running than international road freight. Within domestic and international road freight, rates of empty running differ significantly by country. Rates of empty running have remained relatively constant across countries since 2010.
• Diesel, alongside driver costs, are the two most significant costs that road freight providers face. International driver costs per hour for a Bulgarian haulier are four times lower than a Belgian haulier.
• Cost components of road freight typically change only very slowly. The one major exception is diesel, which is the main driver of year-on-year cost fluctuations.
• Road freight rates have grown slowly over the last decade in line with little change in driver and other costs. While the oil price has sensationally changed at times over the last decade, diesel prices in Europe change less as around half its price is tax, which is relatively constant over time.
• Domestic road freight accounts for around two thirds of European road freight traffic (one third is international). Cabotage accounts for only 2%, but is more important than this figure suggests because it supports the economics of international road freight. Cabotage mainly takes place in Germany and France, with Polish hauliers accounting for over one third of all cabotage.
• CEE hauliers accounted for over 60% of international traffic in 2016, up from around 40% in 2008. Polish hauliers accounted for almost 30% of traffic alone.
1.2 MARKET STRUCTURE
The European road freight market is not one single market. Rather, it is divided up into a number of different segments that may overlap, yet operate in distinctly different patterns and serve different customer types.
The big players in the market are the international network transport providers. These are generally described as 'lessthan- trailer' providers (providers which consolidate and group shipments of various customers to form larger loads), although most of them also provide 'full load' services. Other large providers, such as TNT/FedEx, are usually regarded as 'Parcel Express' carriers.
Fundamentally,these companies are characterised by the use of extensive pan-European networks of cross-docks, that enable truck capacity to be optimised. Establishing such networks is demanding in terms of capital, increasing the entry barriers to the sector and making it very difficult for smaller companies to compete. Essentially, these companies offer economies of scale to complex patterns of freight.
The offer of higher frequency services and small batch sizes, at an economic cost, is highly attractive and these types of services are gradually winning market share. These companies tend to be less active and competitive in national and regional markets, where small to medium-sized carriers are better able to compete.
Generally, large networked providers use smaller truck operators as subcontractors, to supply trucks for their system. In many cases, over 90% of vehicle capacity is provided by these sub-contractors. The attraction of using sub-contractors is the ability to work assets hard, as well as flexibly. In effect, it exploits the easy availability of trucks and the willingness of smaller companies to get poor returns on their assets.
Medium-sized trucking companies are markedly different. Although they may offer networked services covering smaller geographies, the structure of their business is often focused on 'full load' services. These tend to serve medium to large customers, with a demand for services of a higher quality and larger scale. For example, large OEMs may have extensive supply chains that require a dedicated service which is sufficiently sophisticated to provide visibility in consignment tracking or integrity of materials handling.
Smaller trucking companies make up most of the market. Most individual truck operators are small firms, either operating as 'owner-drivers' or owning less than 10 vehicles. In fact, 54% of EU road freight enterprises have just one employee, while 37% have two to nine employees, meaning over 90% of EU road freight businesses have less than 10 employees.
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