Transport Business Indicators

A significant part of the readers of our blog are drivers, owners of small transport companies, registered on the transport and information service “Transportica”.

All people connected with the transport business are concerned about the condition of motor transport, transport tariffs, prospects of development of automobile cargo transportation.

General economic indicators of motor transport

Official statistics has been publishing reports for the past 2 years that show little (0.5-1%) decline or growth in freight traffic.

According to the reports of the State Statistics Committee of Ukraine it is difficult to understand the real situation in the transport sector: calculations are made in the national currency, indicating the nominal volume of the market (excluding inflation).

These statistics do not distinguish road freight transport separately. It should be taken into account that motor transport carries about 30% of export cargo, so that the drop in international road transport is obvious.

Taking into account the fact that export and import road freight traffic are subject to fixed tariffs of international standard, the overall picture of international traffic, despite the decline in volumes, is quite favorable. Nevertheless, zero growth rates after a long decline allow us to speak about the stagnation of the road freight market.

The situation on the domestic market is worse. Official statistics, compiled on the basis of statistical reports of large and medium-sized car companies, does not take into account the market of private cargo transportation.

Not submitting tax reporting, thus falling into the shadow share of the economy, private owners of motor vehicles transport a significant part of agricultural products, cargo for small trading companies, individual entrepreneurs. Private road transporters bring farmers’ products to markets, transport goods to clothing markets, and provide accommodation.

Statistical indicators do not take into account such important changes in the transport industry as deterioration of the quality of roads, aging of the vehicle fleet, outflow from the market of a large number of private carriers. Personnel weakening of road transport, departure of experienced truckers to work abroad are also not taken into account in the general statistics.

Factors affecting tariffs, drivers’ salaries, income of private road carriers

In contrast to motor fuel prices, railroad freight tariffs, which are set (often unreasonably) by one or more monopolists, road freight tariffs depend on competition. Large road transport operators, who serve state orders and thriving production associations, live relatively quietly. The cost of a tonne-kilometre is much higher in such transportation than in the open market.

In the free market, which is represented by Transportica’s transport and information service, road transport tariffs are growing forcibly. This growth can be considered slow, as the prices of diesel fuel, spare parts, food for drivers, and repair rates are rising much faster. Small-scale transport companies and private road carriers cannot increase prices, as the number of solvent customers decreases.

The decisive factor reducing the profitability of road transport is the continuous increase in diesel fuel prices. Even short-term cost reductions of 0.5-1% are replaced by an increase of 5-10%.

Among other negative factors for the road transport business it is possible to allocate:

  • the deterioration of the quality of the motorways. Even optimistic experts believe that 80% of highways in Ukraine require overhaul. Pessimists raise this figure to 97%. Official reports on repairs with impressive figures of budget investments do not inspire confidence among drivers. The majority of repaired roads return to their original condition after the winter.
  • Corrupt schemes for obtaining profitable orders. Only “selected” road transport companies are allowed to enter government contracts. It is not a secret that tariffs are often raised through a corrupt scheme of “kickbacks”. Tenders for government orders are won by road transport companies, which are controlled by deputies and lobbied by officials who are financially interested.
  • Tax pressure. When paying the driver’s salary, the road transport company pays the state another 55% of this amount. Taking into account other expenses, many ATUs do not have the funds to raise salaries and renew their vehicle fleet.
  • Repair costs. Taking into account the cost of spare parts, the repair of a truck at the company’s service station eats up the income of a private trucker for 2-3 months.
  • Growth of prices for food, housing and communal services. The growth of these prices is not directly related to road transport, but to ensure normal maintenance of the family, drivers must work much more, up to 16 hours a day. At the same time, truckers save on food, undermine their health and risk getting into an accident.

With low salaries at the ATU and insufficient income from private trucks, the outflow of drivers abroad is inevitable. As a result, there is a situation when road transport enterprises are not staffed with full staff of drivers, but nevertheless cannot pay a normal salary.

The salary of UAH 9-10 thousand is considered good at provincial Ukrainian motor depots. With the constant receipt of orders private carrier can earn 2 times more. At the same time, the owner of a private truck, who invested heavily in the purchase of the car, does not comply with the standards of working hours, often repairs the truck itself, which affects the atmosphere and the quality of roads.

Among the millions of working abroad, there are many truck drivers. At the same time, there is a demand for experienced drivers of the highest qualification, who agree to dumping salaries, which are 2-3 times lower than in Europe. In Poland, the Czech Republic, our truckers agree to work for 800-900 euros a month. For comparison, the German truck driver receives at least 2300 euros.

Summing up, it should be noted that the main trends in freight traffic are not happy. Without stable growth of industrial and agricultural production, reduction of tax pressure, large investments in road construction and repair, the road transport market will continue to fall.