The European trucking sector has faced complex obstacles in recent years as recession and the increasingly fragmented economic situation of member states have driven protectionism and legislative impediments for trucking firms.
Despite these pressures the sector still very much dominates inland freight transport across the continent, while slowly rising levels of invesment show there are signs of growth.
The recent fall in oil prices has helped revive fortunes at European trucking firms thanks to cheaper fuel, but as price changes have trickled into customer’s supply chains this has also boosted competition.
“Competition has actually increased for many carriers because of reduced fuel prices. In many cases this has forced a reduction in freight rates from customers even though the cost of diesel fuel constitutes only 20 percent of the total transport costs,” Karin Mahl, communication director at Italian freight group Fercam, said. “The significant decline in oil prices has triggered a corresponding decrease in transport service costs, in some cases requiring renegotiations with customers and subcontractors,” Gomez said.
Fragmentation in the sector has also driven merger and acquisition activity over the last year, with XPO Logistics acquiring French rival Norbert Dentressangle for $3.5 billion. XPO, which claims to be the largest less-than-truckload operator in Europe, also owns the second-largest U.S. LTL carrier.
Around three quarters of total European inland freight transport is carried by road, according to figures from the EU’s Eurostat statistics organization. Of an estimated 2,200 billion tonne-kilometres of goods transported within EU-28 countries in 2013, some 74.9 percent was delivered by road, indicating the significant size of the industry within Europe.
Despite this scale and the central role road freight plays in the European economy, many trucking and freight firms operating on vital routes continue to find profits impacted by conflicting policies and incoherent regulation.
“The external challenge of divergent transport legislations in Europe is creating barriers and limiting the free movement of goods,” Gomez said. “Collaborative thinking will help reduce the complexity in regulation, but until it is solved, the risks from obstruction to the fluidity of the transportation of goods in Europe remain.” That could weaken supply chains and impact the development of market economies, Gomez said.
Issues such as social dumping, where drivers from weaker economies supplant drivers from stronger economies due to their lower wage demands, also affect competition. Due to the transitory nature of many of these hires, many firms report shortages of drivers on key routes as wage deflation has pushed salaries below sustainable levels.
“Social dumping is particularly widespread from Eastern European carriers and within Europe there are increasingly fewer truck drivers available. This in turn affects the services that trucking firms can offer,” Mahl said.
Alongside economic and regulatory pressures, the European trucking sector also faces significant change from the implementation of new technology. While bureaucratic issues can seem intractable, the outlook for new technology investment is positive.
The realization of autonomous or driverless trucks is still at least a decade away but in the meantime a raft of new technologies look set to help operators cut costs and increase efficiencies.
Improvements to video technology and software have allowed firms to develop vastly improved systems for monitoring driver fatigue via a combination of wearable devices and face recognition software. Similar video-based early warning systems for collision avoidance, lane detection and mitigation are also attracting significant investment from key players, keen to position themselves ahead of the curve for the next growth cycle.
“Integration of big data and new technologies is a lever for growth. At XPO, we are innovation-driven, with one of the industry’s largest annual investments in technology to continuously improve our customers’ flows and reduce their costs,” Gomez said.
As well as preventing accidents, these investments are also delivering return on investment via lower insurance premiums as firms increasingly rely on software and video evidence to prove their case in accident claims.
Despite strong potential for growth in Eastern Europe and talk of closer integration with Asia through routes via Turkey and the Black Sea, the continued political bickering over Europe’s immigration crisis and friction with Russia over Ukraine mean that Western markets will remain the key growth areas for the foreseeable future.
“We expect our strongest growth to be in the U.K. and Spain but of course, the general state of the economy in Europe is something we will continue to monitor,” Gomez said. “It is still uncertain in some countries despite encouraging signs of recovery in others but we are developing new trade lanes and services with Morocco, Turkey and Russia.”
Although projects under development such as the European Commission’s ambitious 13.1 billion euro ($14.4 billion) Trans-European Transport (Ten-T) project aim to strengthen rail and intermodal transport corridors, political agreement at the continental level still seems some way off.
With many countries now proposing temporary suspension of Schengen area agreements to combat cross-border immigration, it seems likely that closer transport integration efforts at the European level will remain slow for the foreseeable future, and as such road freight will continue to dominate inland freight transport over the short term.