Fuel price hikes a great burden on transport businesses
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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.
“But the number of passengers has fallen by 40 percent in the two years, Dao Ngoc Tuan, the owner of the company, said.”
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.
Questions & Answers
Q.How have rising fuel prices specifically impacted Tuan Duyen bus company's operational costs?
How have rising fuel prices specifically impacted Tuan Duyen bus company's operational costs?
Diesel costs for a round trip have doubled to VND30 million since before the pandemic. This increase comes alongside a 40 percent fall in passenger numbers over the past two years, significantly affecting the company's viability.
Q.What measures are some transport companies taking to mitigate the impact of increased fuel expenses?
What measures are some transport companies taking to mitigate the impact of increased fuel expenses?
Viet Tan Phat bus company has raised fares by 29 percent, while Vintrans sold fuel-intensive buses and bought 20 new fuel-efficient ones. Vintrans is also increasing deliveries per trip, though this reduces speed.
Q.What has been the government's response to rising fuel prices, according to the article?
What has been the government's response to rising fuel prices, according to the article?
The government has used its fuel stabilization fund and cut environmental tax on gasoline by half to VND2,000. The Ministry of Industry and Trade has also proposed scrapping the environmental tax entirely to further reduce prices.
Q.How are rising fuel costs affecting Vietnam Airlines' financial outlook and what action has been taken?
How are rising fuel costs affecting Vietnam Airlines' financial outlook and what action has been taken?
Oil prices have surged to $120-160 per barrel, significantly higher than the $80 budgeted for, potentially increasing expenses by VND8 trillion. As a result, the airline has already hiked its fares.
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