Industry Outlook 2024-2026: Road Freight Transportation Business

EXECUTIVE SUMMARY
 

The road transport industry can expect to see average annual growth of 2.0-3.0% over 2024 to 2026. Demand for transport services will be boosted by the gradual improvement in the outlook for investment, manufacturing and trade, as well as ongoing growth in the tourism sector. In addition, the industry will benefit from improved cross-border trade and the continuing strength of e-commerce. This will then underpin heavier demand for the transport of consumer and industrial goods, raw materials, and machinery.

Competition is tending to intensify within the industry because both Thai and overseas players are expanding their operations to encompass the intermodal transport of road, rail, and water. In addition, costs are rising, there is a growing need to invest in improving the standard of overall operations, and the importance of rail-based transportation is increasing. As such, profits will come under pressure, though given their weaker capital base, more limited scope of operations, relative inability to exploit new technology, and weaker commercial networks, SMEs will be particularly exposed to these risks and these players will find it increasingly hard to compete against large corporations.

Krungsri Research view

Krungsri Research sees the outlook varying across the different segments of the industry.

• General road transport services: Because they benefit from stable demand, large players that are part of extended commercial networks should see turnover grow, and these may in addition be able to generate further income from related businesses such as consultancy, transport management, and packing services. However, for SMEs and independent operators, the outlook is less positive, and conditions will tend to worsen due to the large number of players active in the market and the resulting difficulties that these face when attempting to expand their income base. Going forward, these companies will therefore need to sharpen their competitiveness by partnering with other businesses.

• Oil and gas tankers, and the transport of other liquids: Income will grow solidly on strong demand for fuels from households and the transportation sector. At the same time, because operating in this segment requires considerable expertise, players enjoy a strong negotiating position and are generally able to set rates themselves. The market is thus fairly stable and players typically negotiate long-term contracts, although income may fluctuate according to periodic variations in demand.

• Temperature-controlled transport facilities: Growth in manufacturing and trade will lift income for this segment, which will benefit further from the transition to La Niña conditions and with this, heavier rainfall and improved agricultural outputs. As elsewhere in the industry, the ongoing shift to e-commerce is further underpinning growth in demand. However, costs are rising and competition is stiffening, especially from large players, and this will put downward pressure on profits

• Container haulage: Income will be boosted by the brightening outlook for trade, manufacturing, cross-border business, and e-commerce. Government spending on infrastructure improvements, including the development of Laem Chabang and Map Ta Phut ports, the buildout of high-speed rail lines, and the establishment of transshipment hubs will support further growth in the segment.

Overview​

The freight transport industry plays a crucial role in distributing goods to domestic and international markets. Freight hauliers move goods through all stages of the supply chain, from upstream raw materials through intermediate goods in the mid-stream production and finally to the downstream distribution of finished products. The health of the industry thus rises and falls with the quantity of goods being shipped, and this is in turn dependent on the state of the economy (Figure 1).

Within Thailand, commercial transportation may be divided into five principal modes. (i) Road transportation naturally involves the use of a number of different types of trucks or lorries, including for example, pickups, and container and refrigerated trucks. (ii) Rail transportation is generally used for the movement of bulk, containerized, and industrial goods, though in Thailand, this is controlled by a single rail service provider, i.e., the State Railway of Thailand. (iii) Distribution through pipelines is used for liquids, such as water, oil, natural gas and some chemicals. (iv) Water-based distribution is typically used for heavier goods, this usually encompasses products such as cereals and bulk building materials. Inshore distribution is generally used to support import-export activities, with barges and feeder/cargo ships used to transfer goods from smaller wharfs to the major, deep-water ports. (v) Air transport is typically reserved for high-value items, items requiring special care, smaller and lighter goods, and goods for which delivery is time-sensitive or which spoil quickly. Examples of these include jewelry and precious stones, electronic parts and equipment, vaccines, cut flowers, and fashion items.

Road transport accounts for almost 80% of all domestic freight volume (data as of 2022) (Figure 2). This dominance stems from the fact that successive Thai governments have pursued a policy of prioritizing the road system over the development of the infrastructure required for alternative transport networks, and this has had the result that at present, roads account for 98.9% of the total distance covered nationally by the different transport modalities^1/. In addition, road freight haulage also offers the advantage of door-to-door transport, which means that shippers may move goods from source or origin to recipient in a single stage. The ease and completeness of these connections between sender and recipient cannot be matched by any of the alternatives and so in the case of distribution by rail, water or air, the use of some kind of ‘feeder’ road transport is still required to complete the final leg of the journey. For these reasons, distribution of goods by road has the major role to play in the overall national goods distribution network, and this is reflected in the significantly greater expenditure on road transport than on other distribution modalities (Figure 3).

Road transport also benefits from the fact that unlike other modalities, distributing goods in a single stage does away with the need to make intermediate transfers, and this helps to reduce the loss or damage that would occur when transferring cargo between vehicles. However, with the exception of air transport, moving goods by road is typically more expensive than the alternatives due to the relatively high contribution of variable costs to overall business expenses. The most important of these are: (i) fuel and lubricants, which account for an average of 49% of all variable costs (Figure 4); (ii) labor, which represents a further 32% share of variable costs, though labor shortages mean that this is on an upward track; and (iii) other operating costs, such as the repair and maintenance of vehicles and the purchase of spare parts (another 19% of the total). However, in some parts of the country, the volume of traffic exceeds local capacity, resulting in significant problems with congestion. In light of this, officials have made long-term plans to strengthen the logistics sector by cutting costs and raising transport efficiency, in particular by enhancing the capabilities of the nation’s rail and water transportation networks (e.g., through development of the double-track and highspeed rail systems, and the development of Laem Chabang and Map Ta Phut deep-water ports).

The vehicles used by road hauliers can be split into two groups: (i) privately operated vehicles, which are used for the transport of an organization’s own goods; and (ii) vehicles that offer non-scheduled freight services. As of the end of 2023, there were 1.2 million trucks of all types registered in Thailand (Figure 5), of which 0.83 million (66.4% of all registered trucks) were privately operated, with the remaining 0.42 million (33.6%) being used for commercial operations. Around 51% of the former were 6-wheel vehicles, while 60% of the latter were 10- or 12-wheel models (source: Department of Land Transport). Thai manufacturers thus tend to rely on in-house transportation facilities when distributing goods domestically. This has the advantage of giving manufacturers a greater degree of certainty and control over when their goods will be delivered, and also of reducing the risk of being faced with a sudden inability to access transport facilities. Despite this, though, over the period from 2020 to 2022, the number of commercial trucks registered with hauliers grew by 5.8% per year, compared to just 0.5% annual growth in the number of private trucks registered for their own use. This thus reflects the increasing trend among businesses and manufacturers to gradually outsource these services, a move that helps companies to: (i) cut business costs, including overheads related to administration and management, and other costs arising from vehicle repairs, insurance, and human resources; (ii) take advantage of the expertise and experience of commercial hauliers; and (iii) reduce the overheads involved in navigating the numerous official regulations governing the transport of goods. These include rules on the permissible weight of transported goods and trucks, the maximum size of trucks and of their loads, and the permitted speeds and travel times of goods vehicles (which may vary depending on whether the vehicle is in an urban area or elsewhere).

Haulage services may also be classified into a number of different groups according to the type of vehicles that they use^2/. Business conditions for operators offering each of these services may then vary considerably, depending on the demand for the transport of particular goods, the number of vehicles that the business operates, the number of other operators offering similar services in the same segment, the types of vehicles that they use, and the kind of goods that they transport. Details of each of these vehicle types are given below.

• General purpose trucks: This segment is marked by the large and growing number of players on the supply side of the market. Income is dependent on the quantity of goods moved, but this is not tied to any particular product or season. Hauliers may therefore be hired to move agricultural goods during the harvest or general goods within particular areas, or to provide general haulage services. This segment is subject to significant competitive pressure, in particular over the speed and safety of delivery services, and this is impacting profitability. In 2023, a total of some 0.64 million general purpose trucks were running. These comprised 51.7% of all trucks in the country, and of these, 0.54 million, or 84.3%, were privately operated (Figure 6).

• Trailers/articulated lorries/semis: Within this segment, income is primarily determined by changes in industrial output and in the outlook for business and construction. The goods that are transported in these vehicles are typically either large items, items moved in substantial quantities, or heavy bulk goods such as cassava, rubber and animal feed. These vehicles consist of a tractor unit or a truck attached to a trailer or container transporter, and these may be used to ship packages, industrial goods or inputs, large machinery, construction materials (e.g., long or rolled steel products) or containerized goods that are loaded and offloaded at wharfs, or container yards or inland container depots, while operators may sign contracts based on delivery schedules or the seasonality of production or exports. In 2023, almost 0.36 million vehicles of this kind were registered in Thailand, these thus representing 29.1% of all Thai trucks. Of this total, 62.3% (or 0.22 million vehicles) were operated by hauliers, while 37.7% (0.14 million vehicles) were owned and privately operated by businesses engaged in other activities.

• Commercial vehicles for the transport of liquids, dangerous goods, and goods that have special handling requirements: Operators in this segment are typically able to set their own prices, especially those that have domain specific knowledge relating to the transport of fuels, gasses, chemicals or other dangerous goods3/. These players may also operate other specialist vehicles, such as cement trucks, mobile disease testing units, car transporters, and trucks used to transport waste. The market for these services is relatively stable and therefore long-term contracts for the provision of transport services are often agreed, although turnover still fluctuates according to seasonal variations in the markets for the goods being transported. In 2023, there were 0.14 million vehicles operating in this segment, or 11.1% of all trucks registered in the country.

• Box trucks: Income is broadly dependent on the outlook for the wholesale and retail sectors. Trucks in this category can be subdivided into two groups: (i) Temperature-controlled units/chilled and frozen containers are used for the distribution of fresh food and chilled and frozen prepared meals. The volume of goods shipped depends on the season and demand from particular consumer groups. (ii) General purpose trucks are used for the distribution of consumer goods and miscellaneous items. Hauliers may operate regular lines or have repeat customers, which will then help to reduce uncertainty over fluctuating income. Some players are also expanding their business operations beyond traditional activities, which emphasize the transport of large items or a large quantity of goods, by partnering with other businesses to offer express services focused on the shipping of smaller, more numerous goods. Reflecting these trends and ongoing growth in e-commerce, there were 100,000 vehicles registered in this group as of 2023, up from 66,000 in 2020

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Only 8.8% of Thai road hauliers qualify as mid- to large-size operations (a total of 547 companies from the total of 6,218 registered businesses) but these account for 71.8% of the industry’s income (data as of 2022) (Figure 7). These players enjoy advantages in terms of their better access to finance, their more efficient operations, their greater competitiveness, and their stronger negotiating position. This is generally a result of: (i) the large vehicle fleets that they keep on the road; (ii) the extended commercial groups within which they operate or the business partnerships that they have formed, which allows them to offer comprehensive, integrated services that combine different transport modalities (e.g., road-rail, road-air, road-sea, and road-rail-sea operations); and (iii) their modern management systems and technological infrastructure. Given this, large players are better able to expand the range of the markets within which they operate, the routes that they serve, and the transport services that they offer. These players can be subdivided into the following sub-groups.

• Thai companies offering comprehensive haulage services: These provide logistics services across air, land, sea and water and may be part of commercial groups, the operations of which extend into other countries in the region. Some of these are also the logistics arms of large manufacturers and distributors that also offer transport services to external customers. Notable examples of companies in this segment include Nim Si Seng 1988 Transport, PL Global Transport (part of PTT Global Chemicals), and SCG JWD Logistics.

• Thai operators that have launched joint ventures with overseas players^4/: The majority of these are integrated logistics service providers that offer a wide range of logistics services transporting goods via land, water and air. These typically benefit from their access to a large capital base, the extensive commercial networks within which they are embedded, and their ability to provide comprehensive transport solutions, while these players are also increasingly offering last-mile delivery services. Major companies within this group include Best Logistics Technology (a Thai-Singaporean joint venture), Ninja Logistics (another Thai-Singaporean joint venture), and Kuehne+Nagel Transport (a Singaporean-Indian undertaking).

Alongside these major players, there are another 5,671 small companies active in the industry (91.2% of the total), though these tend to serve a limited customer base or to operate in a restricted geographical area. Operations might thus involve cross-border haulage linking Thailand to neighboring countries, though this will often entail establishing a joint-venture with a Malaysian, Chinese, or Cambodian partner. Alternatively, players may lay on short-distance transportation or express local deliveries, or they may operate within a larger commercial group by offering specialist services, e.g., running temperature-controlled vehicles between food processing units and ports, or contracting to provide connecting transport services, such as last mile or general deliveries in areas that are not served by the larger players. These companies are however often handicapped by their inability to invest in technology and personnel, and by their limited access to working capital.

Beyond offering distribution services to meet demand from the domestic market, operators are also able to develop their businesses by distributing goods produced by Thai manufacturers to markets in neighboring countries. Several factors are helping to develop these export markets, including: (i) trade liberalization and a greater degree of cooperation in the ASEAN zone, including the partial merging of regional economies within the ASEAN Economic Community, the signing of free trade agreements with countries linked to Thailand by land (e.g., China, India, and the ASEAN zone), the creation of the Greater Mekong Subregion (GMS) and the Indonesian-Malaysian-Thai Growth Triangle (IMT-GT); (ii) Thailand’s natural advantages in terms of its geographical location and its shared borders with a large number of other Southeast Asian nations, i.e., Lao,  Myanmar, Cambodia and Malaysia, and its ability to engage in trade by land with Vietnam, India, Bangladesh, China and Singapore; (iii) progress on the development of transportation infrastructure linking Thailand to its neighbors, including the Asian Highway Network, the cross-border bridges or friendship bridges, the boundary posts, the opening of the Malaysia-Nong Khai-Lao containerized train line (Pedang Besar-Na Tha-Thanaleng), and connections to the China-Lao railway via cross-border bridges; and (iv) the forming of business partnerships in neighboring countries, which makes cross border transport significantly more convenient.

Situation

In 2023, growth in the volume of goods shipped by road increased 1.6%, up from 2022’s 1.1% (Figure 8). Improvements in the business environment were due to a number of different factors. (i) The economy expanded by 1.9% YoY overall, though private-sector consumption  and investment were up by respectively 7.1% and 3.2% YoY, while the contribution of land transportation services to GDP climbed 6.5% YoY, a rise from 2022’s 4.5%. (ii) Government stimulus measures helped to boost spending and tourism. These included the Shop and Refund scheme, phase 5 of the We Travel Together program, and in the second half of the year, the introduction of visa-free travel for arrivals from certain countries. (iii) Progress on public-sector infrastructure projects and private-sector residential housing developments lifted demand for the transport of construction materials (in 2023, the construction investment index edged up 0.4% YoY). (iv) Rising internet penetration rates (now at 88% of the population, or 63.2 million people^5/), changing consumer behavior and strengthening demand for an easier shopping experience, and growing familiarity with online shopping are all continuing to boost e-commerce sales, and in 2023, these expanded by 11.0% from a year earlier (source: e-Conomy SEA 2023). As a result of these influences, demand for transportation services for the delivery of construction materials, industrial and manufacturing products, and consumer goods all strengthened in the year.

Nevertheless, a number of headwinds drawn to constrain growth across 2023. (i) Thailand’s international trade contracted -2.4% YoY in line with only a 0.3% YoY growth in global trade. Cross-border trade shark -2.6% YoY (exports fell -4.6% YoY but imports climbed 0.2% YoY) due to the fragility of regional economies which was seen by a -4.9% YoY decrease in Industrial Shipment Index and the effects of drought on harvests a mere 0.7% YoY increase in agricultural outputs. (ii) Public-sector investment contracted -4.6% YoY, and this then had knock-on effects on demand for intermediate goods and equipment and machinery. (iii) Global geopolitical tensions kept crude prices high on world exchanges, and so these averaged USD 82/bbl, adding significantly to transport costs (almost 50% of total overheads).