Road transport in Europe has lost more than 6% of its value this year, according to estimates by Transport Intelligence (TI). The sector is expected to grow by 2024 by more than 3% per year on average, mainly due to international transport.
According to Transport Intelligence, the road transport market in Europe will be worth €324 billion at the end of 2020. This is 6.2% below the level at the end of 2019, when the road transport market was worth €352 billion.
This year’s decline is, of course, the result of the COVID-19 pandemic, which led to lockdowns across Europe in the spring. As a result, production has stopped throughout the continent, which has affected the demand for transport, including road haulage, with the largest share of the pan-European transport market.
In April, production in the EU represented barely 70% of the previous year’s level. After lifting a large part of the restrictions and rebounding in the summer months, production levels reached 94% of the 2019 result in September. Admittedly, the second wave of the pandemic in the autumn probably did not allow the industry to recover completely, but its healthy level is a good signal for the transport market next year.
On the other hand, retail, after a temporary collapse in the spring, has returned to pre-pandemic levels, mainly due to the explosion of eCommerce. Online sales require high stock levels from retailers, which drives (and will continue to drive) the logistics sector.
Economic recovery will drive transport
TI analysts predict that the growth of the road transport market over the next four years will be 3.4% on average per year. At the end of 2024, it is expected to reach €378.1 billion.
Forecasts indicate that the European economy will recover quickly after this year’s collapse. According to the IMF, the average annual GDP growth rate in the European Union over the next four years is expected to be 3.2%, and the pre-pandemic production level is to be reached in 2022.
TI claims that, in the short term, road transport is likely to be preferred to other modes of transport in Europe as more flexible and in direct contact with the customer. For the time being, road haulage rates have fallen due to lower demand and oversupply of capacity. While demand is likely to return soon in 2021 with the expected spring rebound and the lifting of pandemic restrictions, low fuel prices will allow carriers to keep their rates competitive with other modes of transport.
In the medium term, however, rates are likely to increase. Firstly, fuel prices are changing in cycles and will probably eventually increase. Secondly, if transport companies go bankrupt (which is not excluded), a lower supply of means of transport will also lead to higher prices. The entry into force of the Mobility Package at the beginning of 2022 will also affect the price levels of carriers across Europe.
Stable growth on domestic routes
As far as road transport segments are concerned, transport between European countries will develop faster in the coming years than domestic transport. The internal market is expected to grow by an average of 3.1% between 2020 and 2024, while international transport is expected to grow by 4.2% each year.
The value of domestic transport in European countries is expected to fall by 5.5% in 2020. This segment has better endured this pandemic year than the international transport market and, according to experts, already reached pre-pandemic levels in the third quarter of this year. In the coming years, consumption will continue to drive the economic recovery in European countries.
A potential threat is the issue of government support programmes for companies, which have proved to be very helpful this year in keeping many companies alive and many jobs. These programmes are likely to be phased out over the next few months, which could translate into difficulties for many businesses if the economic recovery is not sufficient.
Value of the road haulage market in Europe (in € billion)
|International Road Transport||104.9||96.6||114.1|
|Domestic Road Transport||247.1||233.5||264.1|
|Total Road Transport||352||324||378.1|
International trade as a lever of transport
As far as international transport is concerned, its growth in the coming years is to be more dynamic than that of the internal markets. At the same time, however, due to the closure of borders in the spring, this year’s decline in this segment was much deeper than that of the internal market, with 7.9%.
Stronger growth in the coming years will be driven primarily by the expected rebound in trade between EU countries. According to the IMF, trade between euro area countries is expected to grow on average by 5.1% between 2020 and 2024, which is much faster than the aforementioned expected GDP growth in Europe (3.2%).
As TI points out, this gives a trade-to-GDP ratio of 1.6, while in the past decade it was mostly around 1. The growth of industrial production on the continent will also encourage the development of transport between countries. European economies are closely linked and raw materials and components produced in other countries are needed to produce many goods.
Brexit remains an interesting issue. TI forecasts assume that the EU and the UK will eventually sign a trade agreement setting out the relationship between the two parties after 1 January 2021. However, the lack of agreement is likely to have a negative impact on the level of transport between the parties.
Photo credit @ Bartosz Wawryszuk