Road haulage sector loses speed as costs go through the roof

Although supply currently leads the European truck and trailer markets, road transport activity is eventually driving demand. Following a swift turnaround driven by extra goods demand during the pandemic, the European road haulage sector exceeded its previous level in 2021. On the back of the full reopening of economies, consumers have shifted more spending towards services again, and soaring e-commerce figures showed a soft correction in 1Q22. Consumers have also started to feel the impact of inflation. Solid transport demand growth still comes from clients in construction and manufacturing, although this is expected to slow down in the run-up to 2023.

German motorway mileage (MAUT) – a good proxy for European road freight traffic – showed an increase of some 1.5% over the first five months of 2022. All-in-all, European road transport is set to grow only slightly this year.

The fragmented European road haulage sector has faced a complex mix of rising costs this year. Fuel prices have soared and represent the largest chunk of operational costs. Labour costs are also on the rise and new trucks and trailers turned significantly more expensive. This combination of multiple rising costs is a financial challenge.

The current tight capacity helps transport companies raise their rates, which alleviates their positions somewhat, but still, margins are under pressure. Long lead times force companies to plan investments further ahead, but soaring prices of new equipment make them postpone investments as well. Companies operating a relatively young fleet have a beneficial position in that sense.

Diesel prices at gas stations jumped more than 40% in mid-2022, varying in different European countries based on government measures to lower excise duties. Europe traditionally has a diesel supply gap and highly relied on Russia for supplies prior to the sanctions. As refinery capacity is limited and new investments across the world have been low for years, diesel prices are expected to stay elevated for longer. Although an estimated 80% of companies and even a larger share of the fleet can pass on (most of) the higher fuel bill, a fully matched compensation is often a challenge. In that regard, high fuel prices are a clear incentive to increase fuel efficiency and could also strengthen the case for replacements of material as new generation trucks are significantly more efficient. And saving on the amount of fuel consumed is beneficial anyway.