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TOLLS, HIGH FUEL COSTS AND SHRINKING ORDERS AFFLICT SLOVAKIA’S ROAD TRANSPORT FIR

Truckers bemoan crisis conditions

SLOVAK road transport firms are complaining about tough times in their industry. Many were struggling even before the arrival of the global financial and economic crisis, and the subsequent economic contraction has worsened conditions and squeezed their already thin margins, driving many to the verge of bankruptcy. The outlook for 2012 is not exactly rosy either, especially given the continuing rise in the cost of fuel and the uncertain forecasts for economic growth.

SLOVAK road transport firms are complaining about tough times in their industry. Many were struggling even before the arrival of the global financial and economic crisis, and the subsequent economic contraction has worsened conditions and squeezed their already thin margins, driving many to the verge of bankruptcy. The outlook for 2012 is not exactly rosy either, especially given the continuing rise in the cost of fuel and the uncertain forecasts for economic growth.

“It is said that road transport creates the arteries of the economy,” Pavol Jančovič, president of the Association of Road Transport Operators of the Slovak Republic (ČESMAD), told The Slovak Spectator. “Similar to other countries, in Slovakia more than 80 percent of goods are transported by road. Thus the negative economic situation has been very harshly mirrored in the operation of transport companies.”

Ingrid Rosová, the chairwoman of the Slovak Union of Motor Carriers (UNAS), describes the current situation in road transport industry as deplorable.

“Compared with neighbouring countries we are the worst off,” Rosová told The Slovak Spectator. “Toll fees are incredibly high, we pay vehicle taxes even though most second and third-category roads are inaccessible to trucks over 12 tons, and we can only dream about a cut in the excise tax on diesel.”

According to Rosová, carriers in neighbouring countries have incomparably lower costs.

“When we compare this with the pre-crisis period, I believe that even though the situation in cargo road transport was at the limit of sustainability at that time, that has now been surpassed to a huge extent,” Rosová said.

Jančovič agrees with Rosová, and refers to developments in recent years to explain the conditions under which Slovak carriers now operate.

“2008 did not [represent a] crisis for most of the population, but for our carriers it was the beginning of a lasting period of difficulty,” Jančovič told The Slovak Spectator. “Problems for Slovak carriers started [in 2008] with an excessive increase in the price of oil, and later the price of diesel rose to absolutely record figures.”

This steep increase caused the first wave of failures among Slovak road carriers. In 2009 the global economic crisis, the drop in orders and the pressure on prices as well as payment of leasing contracts led to a second, even worse wave.

The decimated market was then hit by the launch of the electronic road-toll system in Slovakia, according to Jančovič.

E-tolls replaced the previous vignette system. While that scheme involved carriers purchasing stickers that allowed them to use all the country’s higher-category roads for a fixed period, the electronic toll system collects fees for each kilometre driven on higher-category roads. The launch of the new system was accompanied by protests by truckers, who complained that the tolls had been set too high and that the system, as launched, suffered from technical problems.

“Carriers’ costs increased abnormally for three years, which hauliers did not manage to incorporate into the price of transport, which meant bankruptcy even for relatively healthy companies,” said Jančovič.

2011 almost brought a ban on trucks using all lower-category roads, something that Jančovič says would have been illogical. Even though parliament did not in the end adopt this legislation, trucks are still prohibited from using some lower-category roads and directed by road signs to tolled roads, thereby increasing their costs. Moreover, at the end of 2011 orders – especially from importers – declined significantly, indicating a further decrease in production and trade in Slovakia.

Rastislav Brenčič, who manages DHL Freight in Slovakia and Romania, described the situation across the whole eurozone in 2011 as “complicated”. This led to a 30 percent drop in road transport capacity, he wrote in a company press release last October.

Rosová added that due to their high costs Slovak hauliers cannot compete and foreign hauliers offering lower prices have penetrated the Slovak market.

In the opinion of DKV Euro Service, which provides services for road carriers, 2011 was a very complicated year, the SITA newswire wrote on January 4. The company put the almost 20-percent jump in the price of diesel, an increase in vehicle taxes, VAT rising from 19 to 20 percent, and the redirection of trucks over 12 tons from second and third-category roads to tolled first-category roads, as the factors squeezing the margins of carriers to a critical level. Some carriers went bankrupt and most of those who survived were not able to create reserves for the future.

“We are afraid that this situation will not improve in 2012,” Ondřej Pavlík, the executive director of the Slovak and Czech arm of DKV Euro Service, told SITA. “On the contrary, with regards to the increasing growth in diesel prices and the planned hike in taxes, the pressure on carriers could increase and some of them could be forced to drive at rates below their costs in order to be able to pay leasing instalments on their vehicles.”

Slovak road carriers are not very optimistic either, but hope that the change in government might bring some improvement.

“Road carriers in Slovakia have been living in a state of permanent crisis for the fifth year,” said Jančovič, adding that this was the case at the beginning of 2012 and that he does not expect it to improve during the year.

He hopes that even though the government of Robert Fico needs to find money to patch holes in the state budget it will not do this only by savings but also by creating stimuli for an extensive spectrum of employers. He said this would also positively influence the operations of road carriers.
According to Jančovič, all smaller or bigger companies have, for long as possible, endeavoured to make their operations more efficient in response to the poor economic situation. But this space has long since been used up and now it is instead about survival, he said.

Rosová of UNAS shared Jančovič’s bleak assessment.

“I would be glad if at least those carriers which have endured so far continue to survive,” Rosová said. “A lot of road carriers have terminated their operations, since conditions for this business in Slovakia are catastrophic.”

Road transport firms want to open discussion about conditions for their business in Slovakia with the new government. UNAS has already announced seven basic requirements in order to make Slovak carriers competitive with foreign carriers. These include reducing the number of tolled roads, a reduction in tolls on first-category roads, differentiation of fines depending on the seriousness of offences, a reduction in vehicle tax as well the excise tax on motor fuels, and an increase in the maximum allowed vehicle weight.

Expensive fuel

This year’s increases in the price of motor fuels are causing new wrinkles on the foreheads of Slovak truckers. As their businesses already operate on thin margins, they need to pass on the higher fuel prices in their prices.

But due to strong foreign competition, they say, their customers are refusing to accept increases.
“The Pole, the Hungarian, the Turk, the Romanian, etc, will carry it for me cheaper,” Rosová said, citing answers by customers to price-hike proposals made by Slovak carriers.

She claims that diesel in Slovakia is among the most expensive in the region and ascribes the current problems with high motor fuel prices to a monopoly producer and supplier of motor fuels in Slovakia, as well as the deaf ear the Slovak government has turned to this issue so far.

To redress the situation UNAS proposes, as one of its seven requirements, a reduction in the excise tax on diesel from the current €368 per 1,000 litres to €330. In Poland the equivalent tax is €327.11 and in Hungary €355.49 per 1,000 litres.

UNAS hopes that this will prompt Slovak carriers not only to refuel in Slovakia, but also for truckers from other countries to contribute to the Slovak state budget by refuelling here.
From the viewpoint of DKV Euro Service, apart from tolls, rising diesel prices are the biggest challenge road carriers currently face.

Yvetta Kheilová of DKV Kartengeschäft, part of DKV Euro Service, said diesel prices without VAT increased by 10.7 percent on average in 2011 in the countries in which it operates. Prices have gone up by another 6 percent in just the first three months of 2012.

“Carriers mostly work with a very low margin, which in any case cannot cover these increasing costs,” said Kheilová. “Thus we can expect the higher risk rate of doing business in road transport to continue.”

Topic: Transport


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