Annette Hoffmann M.A. Chair of Business Administration

1. Road Pricing in Germany – The Senders’ and the Freight Carriers’ Perspective Annette Hoffmann M.A. Chair of Business Administration with a focus on Logistics and Transport Management University of Duisburg-Essen (campus Duisburg)

2. Agenda • Road tolls for trucks in Germany – Background information • Freight carriers' view and pricing implications • The senders’ perspective • Who will bear the toll costs? • Conclusion and suggestions

3. Road Pricings Objectives • Road tolls for trucks in Germany – Background information Controlling/steering Financing Significant capital requirements for maintaining and extending transportation infrastructure Cost transparency; Internalising true cost of transport Management of traffic flows and utilisation of transport modes Cannot be funded from existing sources "Fair" allocation of network cost, e.g. road construction

4. Options for price differentiation are based on • Road tolls for trucks in Germany – Background information Geographical aspects (based on which section of the road network is being used) Time (peaks, e.g.e depending on time of day, day of week, season) Traffic density per section Type of vehicle (e.g. > 12 t) Degree of utilisation (depending on vehicle utilisation) Frequency of utilisation (depending on how frequent a section of the road network is used)

5. Road tolls for trucks in Germany – Background information • On average 0,124 € / km; 12 t and above • Metering and billing: automatically (via "On Board Unit" – OBU) or manually (via dedicated terminals at gas stations or via the Internet) • System operator: Toll Collect Corporate share: Telekom 45 %; DaimlerChrysler 45 %; Cofiroute 10% • Replacing annual flat fee road usage toll ("Eurovignette") in Germany (> 12 t; valid in Belgium, Denmark, Luxemburg, Netherlands and Sweden)

6. Road tolls for trucks in Germany – Background information

7. 2. Freight carriers' view and pricing implications • Reasoning of the DSLV (Deutscher Speditions- und Logistikverband): • (freight forwarders’ association) • Increase in freight cost - for parcels/individual pieces by 4 – 7 % - for less than truck loads (different customers by 8 – 12 %) - for full truck loads by 12 – 18 % • Tolls are seen as a tax rather than a fee – as such they are passed on to consumers/users leading to an increase in end customer prices of 0.15% • Sales margin of 2 % threatens forwarders' existence • Pre-financing of toll-related cost items: Cost of capital, declining readiness to invest • Administrative cost > € 2.000 per vehicle per year • Empty runs and/or partial utilisation are unavoidable

8. 2. Freight carriers' view and pricing implications Calculation of costs: Per km (mileage covered on German highways) Options for cost accounting depend on... • Full or less than truck loads • Full or empty runs • Local, regional or long hauls • Systemised/scheduled traffic or one-offs Rate of empty runs (on average):< 50 km: 48.4 %< 150 km: 40.2 %> 150 km: 12.8 % Source: Bundesamt für Güterverkehr (Federal Office for Freight Haulage) Different levels of cost accounting • Per vehicle • Per one vehicle's route • Utilisation degree of a vehicle’s route • Per shipment (e.g. pallet) as part of a load • Individual piece/parcel within a shipment as part of a load

9. 2. Freight carriers' view and pricing implications Example 1: Local delivery tour (pieces/less than truck load) with varying highway portions, different shipment sizes and different drop-off points at different customers

10. Transport cost as a percentage of overall logistics cost ? 2. Freight carriers’ view and pricing implications Example 1: • Highway mileage as a percentage of a vehicle's total mileage ? • Tolls as a percentage of total variable vehicle cost ? • Variable vehicle cost as a percentage of total vehicle cost ? = Insufficient cost and pricing transparency

11. 2. Freight carriers' view and pricing implications Example 2: • Network traffic (e.g. parcel/express delivery service) • Homogenous tours between network nodes • Balanced flows, predominantly full capacity utilisation and virtually no empty runs

12. Ability to pass on tolls to the customer... • depending on cost transparency (ability to present a compelling argument) • in accordance with pricing and contract regimes (customised rate cards) • depending on business relationships (power balance; re-positioning (e.g. contract logistics)?) 2. Freight carriers' view and pricing implications • Risk of competitive imbalances • Lack of harmonised vehicle and fuel taxes • Lack of definitive policies governing compensation payments for German freight carriers • "Toll dodgers" – Competitive risk for domestic truckers ?

13. 3. The senders’ perspective • Reasoning of the BDI (Bundesverband der Deutschen Industrie): • (association of industrial enterprises) • Actual increase in freight cost lower than communicated by DSLV • Utilisation has been assumed to be unreasonably low • Tolls are a fee rather than a tax – as such they should not be passed on to customers • A 2% margin on sales appears too low, especially for larger forwarders • Avoiding empty runs is the transport provider's responsibility (eg. through improved fleet management, tour/route optimisation, improved load plans, freight exchanges) • Toll cost can be reduced by shifting to a younger truck fleet (lower emissions) • Selective use of smaller/lighter vehicles below the toll threshold (e.g. 11,9 t truck/trailer)

14. 3. The senders’ perspective • New solutions – Ultra-light trailers • Total weight incl. drive unit 11.99 t • Payload up to 6,5 t • 34 Euro palettes

15. 3. The senders’ perspective • New solutions – Ultra-light trailers • Truck/trailer combination with a total weight below 12 t. • Fuel savings of up to 2 litres per km (approx. €1.700 annually at 100.000km • p.a. and € 0.85 per litre)

16. 4. Who will bear the toll costs? • Key discussion points between freight carriers and senders • Coverage of the toll for full mileage? • Coverage of empty or part load runs? • Use of alternative modes of transport? • Installation of the OBUs (on-board units) and administrative costs incurred? Subject to mutual consent Practical examples: • German chemical group: • Full coverage of pure transport; traffic in remote/metropolitan areas requiring empty returns covered by a fixed rate for empty mileage; for local traffic tolls are doubled if no return load can be arranged; potential for rail and intermodal transports • German automotive group: • Negotiations with different freight carriers; in principle, no compensation for empty mileage; use of rail as alternative mode (rail currently accounts for 60% of transport volumes)

17. 5. Conclusion and suggestions Logistics platforms: Senders grant their alliance partners' transport providers access to their shipments on their internet freight exchange Potential for rationalisation based on network effects Large scale sender with high density network of pick-up and drop-off locations Pool of additional orders; simplified search for return loads to achieve balanced transports Strategic alliances of senders to reduce cost of road tolls? Prerequisite: Trust in high-performance network technology Supporting the SME among the transport providers Opportunity to reduce empty runs must not be overestimated (> 150km: 13% empty runs) Reducing dependency on single freight carrier by spreading orders Opportunity: consolidation of part loads in cooperation with customers; partial relaxation on time-definite and 24h deliveries (depending on industry)

18. 5. Conclusion and suggestions • Discussion points: • What needs to be done from the senders’ perspective? • Differentiating between domestic and cross-border transports • Investigate alternative transport modes • Re-assess 24hr/time-definite deliveries ? • Collaborative solutions with freight carriers • Assess options to partner with other senders Key message: Fact based discussion required in searching for collaborative solutions

19. 5. Conclusion and suggestions Thank you for your interest ! Contact: Annette Hoffmann M.A. www.uni-duisburg.de/logistik annette.hoffmann@uni-duisburg.de Tel.: +49 – (0)203 – 379 – 4381 Fax : +49 – (0)203 – 379 – 5451