Economy - June 20, 2022 | 05:24 pm PT

Fuel price hikes a great burden on transport businesses

Nhat Tin Logistics, which operates 450 trucks, saw fuel costs rise by nearly 20 percent between April and May.

"The surging gasoline prices have put a lot of pressure on businesses, especially in the transportation sector," its CEO, Nguyen Van Tu, told VnExpress International.

A staff holds a fuel nozzel at a gasoline station in Ho Chi Minh City in February 2022. Photo by VnExpress/Quynh Tran

With fuel prices accounting for around 40 percent of costs, the company is negotiating with its customers to increase prices by 5 percent, and is set to cut non-urgent spending.

It is among many businesses that are suffering due to the surge in fuel prices, which threatens to cause inflation and eventually slow down the recovery of the economy hit by two years of Covid-19.

RON95 gasoline saw its price increased by another 2.5 percent to a new peak of VND32,370 ($1.39) on June 13.

This means it has risen by nearly 39 percent since the beginning of this year.

For Tuan Duyen bus company, which operates on the Hanoi-Ho Chi Minh City route, this means diesel costs have doubled since before the pandemic to VND30 million for a round trip.

But the number of passengers has fallen by 40 percent in the two years, Dao Ngoc Tuan, the owner of the company, said.

He said he is considering selling the buses but it is difficult to get reasonable prices as there are few buyers amid the rising gasoline prices.

Raising prices is an option, but business owners are concerned about its effect on sales.

Some companies have however decided they cannot sustain losses any more.

Viet Tan Phat bus company this week raised fares on routes between HCMC and Central Highlands provinces by 29 percent to VND400,000.

Another transport company, Vintrans, sold some of its buses that require a lot of fuel and bought 20 new fuel-efficient ones.

The company is also increasing the number of deliveries per trip to lower costs though this means speed is reduced.

Airlines are set to face continued difficulties with rising fuel prices.

Dang Anh Tuan, Vietnam Airlines’ communications head, said at a recent event in Thailand that oil prices have surged to $120-160 per barrel as against $80 the company had budgeted for.

This means expenses could be VND8 trillion higher than estimated, and fares have been hiked as a result, he said.

Companies are doing all they can to ensure smooth operations amid inflationary pressures.

Ride-hailing firm Gojek, which has seen its drivers’ operating costs rise by 10-15 percent, is offering new bonuses to the most productive drivers to offset their increasing expenses.

It has been seeking to increase recruitment of drivers to ensure demand is met during peak hours.

Between April and May, its number of car drivers increased by 20 percent in HCMC and doubled in Hanoi.

Transport industry insiders are seeking further tax cuts to help reduce their costs.

Bui Danh Lien, deputy chairman of the Hanoi Transport Association, said fuel costs used to account for 40 percent of expenses, but have now risen to 50 percent for many companies.

They could hike prices but end up losing passengers, he said.

The government should further cut taxes such as the special consumption tax to bring down fuel prices, he said.

Nguyen Duc Nghia, deputy director of the HCMC Business Association’s small and medium enterprises support center, proposed a tax break on gasoline for three to six months.

Meanwhile, the government has been saying the increase in gasoline prices in Vietnam is lower than in other countries, only rising by 24-62 percent since the beginning of this year, while in Singapore, which Vietnam often uses as a benchmark, they have risen by 41-84 percent.

This is because Vietnam has used its fuel stabilization fund and cut environmental tax on gasoline by half to VND2,000, Le Viet Nga, deputy head of the Ministry of Industry and Trade’s domestic market department, said recently.

The ministry has proposed scrapping the tax altogether to bring prices down further.

For now companies are caught between a rock and a hard place as continued operations means accepting low profits or even losses while increasing prices could mean losing customers.

Tu of Nhat Tin Logistics said his company is doing all it can to ensure prices are not raised, but if inflation continues, it would have no choice but to make further adjustments to prices.

Dat Nguyen