The CV industry in Europe and the road freight transport have been badly hit by Novel Coronavirus.

Story by Bhushan Mhapralkar

Amid positive news that the 100 agency workers employed on DHL logistics contract at Tata Motors’ Jaguar Land Rover plant at Halewood in Merceyside have had their jobs saved in the UK, the spread of Novel Coronavirus in Europe has hit the European auto industry and the logistics sector hard. If auto makers and subsequently their suppliers have had to suspend production at plants across UK and the rest of Europe, an indication of how bad things have been in Europe as far as CVs and the logistics sector is concerned, is had from the fact that sales of LCVs fell more than 45 per cent in the UK in March 2020. If the use of LCVs by e-commerce players like Ocado grocery supplier in the UK, which has been experiencing exceptionally high demand since the virus unleashed its fury in Europe may be described as a silver lining, the CV industry and the logistics sector as such is clearly not in the best of health since the second half of March 2020.

With news like the Schaeffler family donating Euro-one million to the Red Cross in the fight against Covid-19 and Lear postponing its investor day (albeit in the US, but with consequences for Europe and its other markets around the world) occupying the top space of various websites, it would not take long to figure out that the ill-effect of Novel Coronavirus could further slowdown the already slow-paced economy of Europe. The amount of jobs lost may only be clear in May 2020 or later, the extent of damage Covid-19 has inflicted on the manufacturing sector in Europe is no less by any means. As auto makers and their suppliers join hands with the Governments in Europe to take the fight against Novel Coronavirus to the next level, the silence of machinery and the lack of movement of trucks carrying parts, autos, etc., are damning.

Badly hit
With 19 per cent of all the CVs made in the world, manufactured in Europe (37 plant in the continent produce LCVs, 59 produce heavy-duty vehicles, 47 produce buses and 72 produce engines), the CV industry and its suppliers are hit badly. Almost all of them have had to announce the suspension of production at their plants across Europe, including Russia. Companies like PACCAR, CNH Industrial (Iveco) and Daimler were quick to make the move in the interest of the health of their workforce. Their managements, and that of others, continue to monitor the situation and the ensuing economic damage incurred. The wounds inflicted by the virus are unlikely to get the CV industry and the Logistics sector to limp back to normal in a hurry. How companies would manage to get the social distancing of its workers right after production resumes is the question being asked. It is made especially important with CV makers like MAN announcing short time work at its production facilities in Europe. With strong economic centres in Europe like Milan in Italy taking a big hit, the economic loss in Europe is likely to exceed expectations.

With road freight transport finding it tough to anticipate freight rates starting March 2020, it would be safe to assume that the hit to the CV industry in Europe is no ordinary this time around. Accounting for 76.7 per cent of all freight transported over land in the European continent, road freight transport as part of the logistics sector started feeling the heat in February 2020 as major supply chains started disrupting, especially those that involved the flow of raw materials and goods from China. If the closing of borders with countries that experienced a rapid spread of virus like Italy, effectively amounting to the temporary suspension of Schengen agreement, the CV industry and the logistics sector found it increasingly difficult to move cargo and keep the demand for work from ebbing. The announcement to suspend production activities by the manufacturing sector across Europe until the second half of April 2020 ensured that only essential commodities would move, leading to a substantial drop in fleet utilisation.
If the effect of the pandemic was made clearer by CV majors like Volvo Trucks announcing the closure of its Kaluga plant in Russia through much of April in the interest of the safety of its workforce there, the significant deterioration in sales and the heightened uncertainty regarding parts supplies was apparent. The supply of aggregates being disrupted, the CV industry in Europe has, rather than produce new vehicles, taken to concentrate on supporting their existing customer fleets. Mentioned a source at Volvo Trucks’ Dublin plant that they are looking at what social distancing steps would need to be taken if the decision to resume production was taken. The plant has a workforce of 2800 people, he informed. With borders within the Schengen area and between the European Union, and the rest of the world, partially or completely closed, truck and bus services in Europe have been largely affected. If land transport involving trucks is being maintained to not let the supply chain collapse, it is not devoid of disruptions and slowdowns.

Disruptions and slowdowns
Heightened border control, sanitary measures (temperature measurements by drivers, etc.) and special arrangements (closure of certain border posts and detours, and the unavailability of drivers) has led to disruptions and slowdowns in the movement of trucks across Europe. It has also led to the floating of a proposal of designated ‘Green Lanes’ at the borders for the transportation of goods in EU. If such a measure could ease some of the difficulties faced by the logistics sector – truck fleets especially, as many European countries have sealed their borders with neighbouring nations most affected with Novel Coronavirus, the road ahead of the CV industry and the Logistics sector looks challenging, at least for some months ahead.

The fact that many European countries have enforced measures like checking the temperature of drivers and verifying their recent activities systemically at the border control, is adding to the woes of the Logistics sector. Not stopping at that, many countries in Europe have framed rules like drivers not exiting the transit area, and to take the shortest route to the border when passing through. While European nations like Bulgaria have taken to escorting transitioning, some countries have been escorting trucks to their unloading point. The economic damage caused by the suspension of bus services in Europe may be hard to calculate at this moment in time, the good part is, most EU countries were quick to define the rules and regulations relating to the freight of essential items. They were quick and in unison to exempt trucks ferrying essential goods from restrictions.
With countries like Denmark closing down some of its borders and ensuring the entry of trucks through Frøslev (E45) only, the number of canceled sailings reached unprecedented levels by early April 2020. And, this is not the case only in Denmark, but through much of Europe starting mid-March and continuing into April. Coming to face some unprecedented challenges in the days leading into the arrival and spread of Covid-19 virus in Europe, the truck transportation industry (as part of the logistics sector in Europe) has been one of the business areas that has borne the most brunt. It all started with custom clearance ports seizing to function at full capacity across EU, mentioned an International Road Transport Union (IRU) source. The transport of goods by road was affected, he informed. He also pointed at the establishment of COVID-19 Info Hub, a global source of first-hand, real-time updates by, and for, the commercial road transport sector by IRU in cooperation with its members and partners in Europe.

In the wake of the effects of Covid-19, IRU has urged governments to designate road transport as a key service, to recognise the vital role of CV drivers, treat and protect transport workers as key workers during the Covid-19 response, guarantee the safety and well-being of drivers through cross-border logistics, offer priority government support to road transport small and medium-sized enterprises (SMEs) and provide respectful treatment and working conditions for drivers. Affecting over 1.1 million jobs in the automotive manufacturing sector in EU, and a good number of jobs in the road transportation space as well with a drastic drop in utilisation level, the real damage Novel Coronavirus has caused seems to be incalculable in terms of lives as well as economics. It is like a mega tornado reaping through the continent. With governments as well their authorities working closely with the logistics sector in Europe to keep the supply chain from completely breaking down, a ray of hope is had from how the e-commerce players are witnessing their business climb. Taking to prioritise the supply of goods, e-commerce players like the Ocado of UK have witnessed exceptional high since the pandemic touched down in Europe. Expressed an Ocado source, more people than usual seem to be placing particularly orders.