Today’s Pickup: In China, parcel delivery firms waging price war

Good day,

In a quest for more business in China’s booming e-commerce markets, parcel companies in that country are waging a pricing war, threatening to eat up profits and pressuring margins for companies already facing razor-thin operating budgets, according to a report in the Nikkei Asian Review.   

Average price per delivery has dropped 20% in the last two years, the paper reports, even as volume has risen past 31 billion packages delivered in 2016, a 51% increase from 2015. Deliveries are 31% through the first half of this year.

According to Nikkei, some companies saw their net profits grow between 20% and 70%, but profit margins are falling.

“Market leader SF Express reported that sales during the first half of 2017 grew 23% from a year earlier … while net profit increased by a modest 7% to 1.9 billion yuan. And as operating costs, including wages, rose nearly 30%, the company’s operating profit margin fell to 7.9% from 8.7% a year earlier,” Nikkei reported.

Many companies use outside services to delivery packages, but quality service has been a concern. SF Express uses its own logistics network and seems to be weathering the storm better, Nikkei said.

Did you know?

Truckers make up about 7% of highway traffic, but pay 36% of the taxes and fees that make up the Highway Trust Fund.

Quotable:

“On our way to being global champions, all options are open.”

– Andreas Renschler, Volkswagen AG board member responsible for commercial trucks, on whether VW will take a larger stake in Navistar

In other news:

Target expands next-day delivery

Target has expanded its next-day delivery service for goods ordered online. The service will expand to New York and Los Angeles and now cover 70 million people. (Star Tribune)

Turning to video games to train autonomous trucks

South Korean startup Mars Auto is using a video game to train its artificial intelligence program on how to drive a truck. (Outer Places)

Montreal looks at banning certain trucks

The city of Montreal is looking at potentially banning certain trucks with large blind spots and mandating additional safety devices to improve safety in the city. (CBC)

Federal government to reinstate emissions rule

Just one week after 8 states sue, the FWHA will reinstate a rule it suspended that requires states to report on greenhouse gas emissions from on-road vehicles. (StreetsBlogCal)

Diesel price drops slightly

For the second straight week, the U.S. national average price for diesel fuel dropped, falling 0.3 cents per gallon to $2.788 according to the Department of Energy.  (Transport Topics)

Final Thoughts

FreightWaves is spending this week at the North American Commercial Vehicle Show and after two days of meeting with truck OEMs, it is clear that electric vehicles are coming. Every one of them has either plans in the works or actual vehicles on display. While they are clear electric is not for everyone, it’s also clear that they expect it to be quite popular in the not-too-distant future.  

Hammer down everyone!