Russia’s current petrol shortage, which is affecting several regions including Tomsk, Belgorod and Voronezh, and which resulted in an embargo on refined petrol exports late last month as prices escalated, has contributed to a 25-40% rise in costs for vehicle deliveries in the St Petersburg and Moscow oblasts over the last three to four months.
The rise is also affected by the spike in business and the scarcity in delivery resources in the country, leading one major OEM active in the country to state they had not seen price escalation on the present scale since 2006/7 when the market was approaching its peak.
Oil companies in Russia have blamed the fuel shortages on government support for car sales, which have grown 60-70% in the first months of 2011 compared to 2010. However, given that vehicles sold under Russia’s scrappage scheme replaced older vehicles with more fuel-efficient models, that accusation is questionable.
The fuel shortages are more likely a direct result of those same oil companies diverting sales from the Russian market to others to take advantage of ‘free market’ higher prices, according to Alexander Rogan, director of CIS at emergency logistics provider Priority Freight.
“This speculative sale of a commodity has pushed a populist government into making a public demonstration of power,” he said. “The ruling party has seen its popularity slip by 40% in the last 12 months and, given the 2012 election, they want to arrest that slide. Oil company executives are the temporary equivalent of the UK’s bankers.”
So far the fuel shortages have not led to any delivery failures amongst Russian operators serving the automotive industry. According to Alexander Larin, CEO of Russian finished vehicle carrier, Rolf SCS, this is because the majority of logistics companies, including Rolf SCS, have corporate contracts with major fuel companies.
“It means that fuel companies ‘reserve’ fuel for their corporate clients according to the committed volumes and provide them with the fuel needed in full measure on a daily basis,” Larin told Automotive Logistics News.
And now that the Russian government has imposed an embargo on exports of oil, and prices are dropping again, the impact on delivery costs from this angle will ease.
But the increase in delivery costs is also being affected by a lack of capacity as sales of vehicles have rebounded. Unlike transport companies operating in other sectors and using less specialist equipment, finished vehicle carriers were unable to find new markets or clients when the economy took a dive. Many went out of business in Q4 2008 and there is a serious shortfall in capacity now that volumes are up.
“Following the finished vehicle logistics operators failing between 2008 and 2011, there is now a 30% shortfall in required capacity in the Russian market,” said Rogan. “As OEMs are still not giving long-term contracts that mirror the investment in equipment, the surviving operators are not investing.”
Rather, these surviving providers are collaborating in the deployment of existing assets. This is a response, not only to OEM calls for their providers to collaborate during the crisis, but also to the perceived lack of support shown by those OEMs at that time according to one industry insider.
As opposed to risking further investment providers are sharing and benefiting from the 25-40% increase in charges as volumes rise.
So the call for collaboration from the OEMs, something that was stressed at last year’s Automotive Logistics conference in St Petersburg, Russia, is now something that is costing them dearly.
“Perhaps they should have been more careful,” said Rogan. “Sometimes you get exactly what you ask for.”
The next Automotive Logistics Russia conference will be held in Moscow between 14-16 June this year. More details are available here www.automotivelogisticsrussia.com
