Mats Harborn Interview
Mats Harborn, Chairman China Commerical Vehicles Board, ACEA, talked to Truck Industry Research about road transport policy and the modernization of Chinese road transport structure.
TIR: Where is China road transport on the maturity scale?
MH: It’s still very early. There are two main problems. One is that the industry is still very fragmented, that the majority of trucks are still operated by one truck owner. I would say it is 95% of the industry. Which means that there is very little consolidation of goods flows. Instead we have small, very unprofessional truck owners competing with each other. Most of them have to wait at the logistics centres, which means they are idling most of the time. Once they get freight they try to pack as much as they can, they overload, and they go to the destination and wait for goods again. That is the life for most truckers here and they don’t make ends meet and they keep prices at extremely low levels. The other major problem as I see it is the lack of enforcement of rules and regulations. For example when China measures the weight limits, the simple way is to count the number of axles. The cheapest tractor unit is a 4x2. Then you put on a trailer with three axles. But if you add one axle to the tractor then you can go up to 55 tonnes - but the weight distribution is totally wrong - in combination with a wrongly specified trailer this means that axles are highly overloaded and makes it unsafe. Or you have the wrong combinations, like you have a two axles tractor with a three axle trailer. If axle weight were really enforced strictly the maximum train weight of a six axle combination would be 49 tonnes. Instead of using heavyweight trailers you could use lightweight trailers that carry the same. But that doesn’t happen. Which means that the roads, this fantastic infrastructure, is being worn out prematurely because of lack of enforcement. The government and relevant authorities need to work with strict enforcement and adherence to the weight and length standard.
TIR: How might this happen?
MH: I think the mechanism there could be a greater awareness that efficient transport, efficient logistics, lowers total costs in society. I think most stakeholders accept and understand that. There is an awareness that the share of GDP taken up logistics is too large. The intention is to go from 18 to 16. That was put into a central plan launched by the premier in June last year. That is very significant. It is the first time that the state council really acknowledged the problem. If Chinese industry is struggling with increasing cost, then efficient logistics would be one means to reduce cost to improve bottom line. And I think that, together with the pressure on efficient logistics from e-commerce is moving the whole industry towards better efficiency. When it comes to the length and weight directive we have been engaging with the government for four years now. We are getting to the final stage of a new directive or a new standard. Hopefully it will be passed this year and implemented next year and they will decide to have some kind of transition period. Perhaps I am being a bit optimistic, but it is definitely happening.
TIR: Why is this happening?
MH: This is all part of the new reform program where at the third plenum in November 2013 the government said that it needs to redefine it’s role in society. It didn’t say but what it meant was that instead of supporting industry it now needs to support the consumer, and instead of being both a referee and a player it needs to be a referee. The government has to decide it stands on the side of the consumer, it stands on the side of other road users, and it believes that if it enforces the rules it will actually also make the manufacturers more efficient. And the operators of the trucks.
TIR: Is there a growing concern for safety - pedestrian safety or other road users safety?
MH: Yes, it’s one of the issues but…from the authorities’ point of view the concern is road deaths in general. And I think that one of the conclusions that they have drawn in China is that vulnerable road users are not separated from invulnerable. This is a major cause of deaths.
TIR: What other drivers for change are there?
MH: Another thing that should perhaps be included is that as China is moving towards more value-added production, transport will be bulkier and lighter. So that changes the way transport is conducted. I think what we are going to see is that the bulk low end cheap industries in general in society will be phased out. And hopefully the government has enough resources to manage that so that the private high end value-added a will increase and at some point will generate enough revenue to finance the cost of dismantling the low end. I think that’s the rationale behind the policies today.
TIR: Will this be enough to change the structure of the road transport industry?
MH: I see no reason why we shouldn’t get to a tipping point in the road transport industry. We are now seeing the beginning the decline in general cargo trucks, because general cargo trucks, generally they will be 8x4s, are not as efficient as a tractor with a semi-trailer, so they will gradually be replaced by tractor-semitrailer combinations. I think today there is recognition that this market will never grow again. I think we will see the sales numbers will drop and utilization rates will go up. It’s going slowly, but we will see vehicles built to better quality and have longer life length. In component upgrades the next thing will be driveline, upgrading for speeds. And also an upgraded brake system. So the actual transport capacity will go up, but the number of vehicles delivering that capacity will go down. We should expect this to be a five to ten year process.