28 May 2021

Carbon targets hurdle: one-third of small road freight operators tipped to disappear

10:46 am on 28 May 2021

Further consolidation is expected in the road freight industry as small firms struggle to meet decarbonisation targets on their own.

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The country's road freight operators are often small owner-operators, making it difficult to afford to make changes, a new report says. (file pic) Photo: 123RF

An industry report from Westpac New Zealand indicates the key to meeting carbon targets is to improve operational efficiencies, which would likely leave the road freight industry with far fewer than the 4700 firms currently in business.

"Reducing fossil fuel consumption and minimising the carbon content of fuel used is easier said than done," Westpac industry economist Paul Clark said, adding it would require a significant investment, which would be beyond the reach of small operators who operate on razor-thin margins.

"Technologies can help to some extent, but most are either immature or the associated infrastructure is lacking."

Clark said most road freight operators were not well positioned to make the necessary changes, and expected at least a third of them would disappear or be consolidated into larger firms.

"This is an industry full of small owner-operators. Even during the best of times, competition is cut-throat, and in a marketplace where price is king, margins are tight.

"With most operators focused on keeping their heads above water, investment in lower-emission vehicles is hardly front of mind."

He said the conditions were not good for decarbonisation or for achieving operating efficiencies, which would add further pressure on margins.

"Over time that's likely to be unsustainable, leading to consolidation in the industry."

Clark said the government could help the road freight sector to decarbonise by offering incentives.

"It could also look to quicken the pace of consolidation in the industry by driving up the price of carbon through limits imposed on carbon credits traded within the New Zealand Emissions Trading Scheme."

In any case, he said it would likely take a decade before there was a significant change in the size and shape of the industry.

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