Vietnamese transport firms struggle amid fuel price shock

Geopolitical tensions in the Middle East are pushing global fuel prices higher, triggering a series of price increases in Vietnam that make many companies struggle to maintain operations.

Recent tensions in the Middle East have quickly been reflected in the global energy market and are spreading to Vietnam. In recent price adjustment cycles, domestic fuel prices have been repeatedly raised, adding cost pressures to many economic sectors.

However, the transport sector, which depends directly on fuel, is among the most vulnerable. Each fuel price hike almost instantly affects companies’ business calculations.

According to estimates from several firms, fuel costs currently account for about 30-40% of total operating costs in road transport, and even higher for businesses with large fleets or long-haul routes.

This means that even a 10% increase in fuel prices could push operating costs up by several percentage points, a significant figure given the transport sector’s already thin profit margins.

Mounting pressure on transport companies

Within the logistics chain, road transport is the link most directly and quickly affected by fuel price fluctuations.

An executive at a container transport company in Ho Chi Minh City said consecutive fuel price increases have significantly raised fleet operating costs.

“Each long-haul tractor-trailer can consume hundreds of liters of diesel per day. When fuel prices rise by just a few thousands of VND (VND1,000 = $0.04) per liter, the additional cost for the entire fleet becomes enormous,” the executive said.

According to the company, fuel costs currently account for about 35-40% of total operating expenses, while freight rates cannot be adjusted immediately. In many long-term transport contracts, freight rates are fixed in advance. When fuel prices rise suddenly, businesses are almost forced to absorb the additional costs themselves.

Pressure is even greater as the domestic transport market remains fiercely competitive. Many companies say profit margins hover around 3-5%, or even lower on highly competitive routes. Under such conditions, every fuel price increase significantly erodes profits.

What are businesses proposing?

Not only freight transport but passenger transport is also significantly affected. For taxi operators, fuel typically accounts for about 25-35% of operating costs. A taxi company in Ho Chi Minh City said that when gasoline prices rise, fuel costs for each vehicle can increase by several hundreds of thousands of VND (VND100,000 = $3.8) per day.

“If fuel prices continue to rise, businesses will have to consider adjusting fares or applying fuel surcharges,” a company representative said.

However, raising fares is not easy as the taxi and ride-hailing markets are highly competitive. In many cases, companies must accept lower profit margins to maintain market share.

Facing rising fuel costs, many transport firms are trying to optimize operations to reduce the impact. Yet one of the biggest challenges is that they cannot adjust freight rates immediately. Raising prices too quickly risks losing customers.

A representative of a passenger transport company operating the Eastern Bus Station–Central Highlands route, said rising fuel prices have clearly affected the company’s operations. Meanwhile, the sector is currently in its low season, but companies are still required to maintain service frequency.

To cut costs, the company is optimizing routes, increasing the rate of round trips to reduce empty runs, and considering fare adjustments.

“Businesses must both retain customers and balance costs. If the situation continues, both companies and passengers will be strongly affected,” he said, noting that many fixed-route bus operators have already raised fares to offset losses.

According to experts, fuel price volatility not only affects transport companies but could also spill over into other sectors of the economy, as fuel is a key input for transport. When transportation costs rise, the prices of goods may eventually increase as well.

Le Trung Tinh, chairman of the Ho Chi Minh City Passenger Automobile Transport Association, said tensions in the Middle East have had an almost immediate impact on transport businesses.

Under the current market mechanism, companies are allowed to decide their own fares while the government plays a regulatory role. However, when input costs surge, fare adjustments become unavoidable, he said.

To stabilize the market, he proposed two key solutions. First, in the long term, Vietnam should increase its national petroleum reserves, as current reserves remain relatively low compared to many countries in the region.

Second, regulators should proactively manage the fuel price stabilization fund and consider reducing or exempting certain taxes and fees when fuel prices surge.

Meanwhile, Bui Van Quan, chairman of the Ho Chi Minh City Cargo Transport Association, said authorities should ensure stability in both fuel supply and prices so businesses can operate smoothly, noting that supply shortages have sometimes occurred.

“This is a force majeure situation, and everyone understands the circumstances. Transport companies are facing great difficulties as fuel costs rise while other expenses remain unchanged. We need understanding and support from partners and customers,” he said, urging authorities to take measures to stabilize the market.

Fuel price movements in the coming period will largely depend on geopolitical developments in the Middle East.

If tensions escalate further or disrupt oil supply, global fuel prices could remain high for an extended period. That would mean Vietnamese transport companies will continue to face the challenge of rising fuel costs - the biggest variable in the transport business.