France’s trailer market

The 2013-14 season was a time of flux for Europe’s commercial road transport industry, as it had to get to grips with a slow recovery and adjust to a new economic landscape where the only constant is change. Coming out of the summer recess, we now see a new, more buoyant business reality emerge at the heart of Europe. But one country is still trailing behind. 

Despite being ranked as Europe’s second largest economy, the proud nation of France is being far outperformed by the top-ranked Germany – much to the dislike of French businesses trying to compete on the international stage. 

While Germany is forging ahead, economic growth in France has been inconsistent and the unemployment rate hit a record high of 11 per cent at the end of 2013. On top of that, the French economy saw virtually zero growth in the first three months of 2014.

By way of comparison, the ‘Grande Nation’ had a budget deficit of 4.3 per cent and total debt at 93.5 per cent in 2013, compared with Berlin’s zero and 78.4 per cent, according to French newswire Agence France-Presse (AFP). The French public-finances watchdog subsequently warned President François Hollande’s Socialist Government that its forecast of one per cent growth for 2014 looked “high”, and the European Commission added that its expectation of 1.7 per cent growth in 2015 was also optimistic.

In that sense, it’s no surprise the Government decided to roll out a new road toll system in June. According to Reuters, the new scheme will impose charges on commercial vehicles on routes with the heaviest freight traffic.

The measures are said to generate about €550 million a year – about half the projected revenue from the failed Ecotax project, a heavy vehicle charging scheme that was supposed to take effect in January but got cancelled at the eleventh hour. Back then, the French Government was forced to halt the scheme after activists took to the streets saying it would damage domestic trucking.

As the new toll system will now continue where Ecotax left off, the second half of 2014 could see the plateau continue. In anticipation of the new cost factor, heavy truck registrations – traditionally a reliable gauge of future trailer demand – were down a massive 30.2 per cent in May, according to the European Automobile Manufacturers’ Association’s (ACEA). In line with that, heavy trailer registrations were down 7.5 per cent.

Overall, the French heavy truck market was down 4.8 per cent for the period between January and May 2014, compared to a 7.2 per cent increase across the Union – making France’s tardiness increasingly obvious. Only the UK faced a comparable downturn (-28.1 per cent), while Germany (+19.1 per cent), Italy (+19.8 per cent) and Spain (+41.9 per cent) easily outpaced France over the first half of 2014.

Trailer-specific data over that period may not be quite as disappointing, but a look at the market’s long-term performance indicates that registrations in the segment are only just passing the 1994 level again – demonstrating just how vulnerable the transport equipment industry really is.

2014 registrations are estimated to come in around the 16,000-unit mark against a long-term average of more than 21,000 units per annum, and there is no improvement in sight. “Based on current trends, the market will remain stable at a low level for the next five years,” says Jean-Michel Mercier, Director of the Observatoire du Véhicule Industriel (OVI), a French automotive industry body.

As a result, it’s hardly surprising that Polish trailer manufacturer Wielton has placed a binding bid* on France’s leading trailer brand, Fruehauf, in July. While the Polish economy is growing at a rapid pace again, the murky business climate in France has left Fruehauf exposed.

While experts still consider Fruehauf a profitable business, the Wielton deal could be just the right medicine for France’s leading brand to retain its market position.

And, Wielton’s move into the French market could come at just the right time. In late 2013, Lyon’s Solutrans exhibition saw an eight per cent increase in attendance figures compared to the 2011 event – a strong sign that the French domestic market is not written off just yet. But although Solutrans did make a point of displaying French inventiveness – and with it some spirit of optimism – it did not necessarily manage to crank up domestic sales. In fact, it showed that it’s mainly specialised, low-volume equipment that is sought after at the moment, while the overall market is still subdued.

As a result, OVI’s 2015 prediction is fairly cynical. It is expecting the French transport equipment market to remain “idling” for yet another season as France has increasingly become a worry point in the recovery. According to OVI, the construction industry won’t be able to give the market a strong enough boost to get going again and the industry-wide tendency to postpone scheduled replacement will further undermine the upturn – unless Paris is able to turn the tide.

Already, the Government has gotten its European partners to allow it to push back a deadline for reducing its budget deficit to three per cent of gross domestic product; and President François Hollande called for exempting investment spending from deficit figures in a move to re-energise the nation’s economy.

Michel Sapin, the French Finance Minister, therefore struck a more reassuring tone about the Eurozone’s second-largest economy when he recently spoke to the New York Times. “France is a huge economy in Europe, with a large industrial base and innovation and research,” he told the US newspaper. “I don’t see how we can be sick, or at least sick for a long time. We are reacting, we’re lowering costs and taxes for companies, and we’re working for more competitiveness.”

After two years of hesitation and muddle, it seems there is now a clearer sense of where French policymaking is going – but the question remains how fast those measures will trickle down to the transport industry. Output in manufacturing and services continued to fall in June, according to The Economist, and firms cut jobs for an eighth consecutive month. The magazine can also confirm that investment has dropped or been flat in eight of the past nine quarters, and that small companies are still wary of taking risks.

Thus, experts agree that the only way out is openness to change. The first measure taken in this regard is the instalment of Manuel Valls as Prime Minister, who stepped into the French gloom three months ago after catastrophic local-election results had forced the President to bring in a fresh face. Now all eyes are on him to retrieve that one magic ingredient so sorely lacking in France – confidence.

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