Responding to the "price surge" of electricity and gasoline.
In less than two weeks, there have been two price adjustments for two essential commodities: electricity and gasoline. Consequently, the prices of other supplies and equipment have also escalated. This directly impacts production and business operations, causing many businesses to struggle.
(Baonghean)In less than two weeks, there have been two price adjustments for two essential commodities: electricity and gasoline. Consequently, the prices of other supplies and equipment have also escalated. This directly impacts production and business operations, causing many businesses to struggle.
From large enterprises to small traders, everyone shares the same worry: rising prices of goods, coupled with persistently weak purchasing power. Production costs are increasing, while the price of finished products is difficult to raise further due to declining orders. Businesses and manufacturers fear a drop in revenue due to a lack of customers and loss of market share.
According to Mr. Le Xuan Dat, Director of Trung Do Granite Tile Factory: The company's main business is the production of ceramic tiles and fired clay roof tiles. Average annual production reaches over 2,000 square meters of granite tiles and 2,034 roof tiles. If the company's production line runs at full capacity, with an average monthly electricity bill of about 7 billion VND, after the electricity price increase, the monthly electricity bill has risen to nearly 500 million VND.
Packaging products at Trung Do Granite Tile Factory.
In addition, the factory uses approximately 3,000 tons of coal per month to fuel its kilns. With prices increasing by over 30% since March 2013, input costs have risen from 4 billion to 4.4 billion VND. This doesn't even include the significant increase in transportation costs, as the company's main raw materials are sourced from northern provinces and its product distribution network spans across the country, which has increased by 10-15%. The simultaneous increase in raw material prices has driven up the company's input costs by billions of VND each month.
These significant figures are a major obstacle, making it difficult for production and business to become profitable. Solutions to reduce input costs, such as streamlining production lines and improving technology, equipment, and techniques to minimize fuel consumption and offset the increased costs, are proving challenging for the company. Meanwhile, to remain competitive, maintain market stability, and ensure preferential treatment for traditional customers, the company cannot increase product prices.
After several consecutive price increases, the current price of A92 gasoline in Vinh City is 25,060 VND/liter; 0.05S diesel is 22,650 VND/liter... These price indicators have caused many difficulties for transportation businesses. However, the businesses' policy is to try to hold on and not increase fares at this time. The reason given by the businesses is that the recent increase in gasoline and diesel prices has led to increases in many other goods, forcing consumers to tighten their belts, thus significantly reducing revenue from passenger transportation services. Increasing fares at this time would greatly affect attracting passengers.
Mr. Phan Huu Man, Chairman of Binh Minh Transport Cooperative (Vinh City), said: The cooperative has more than 120 passenger buses operating within and outside the province. Of these, 20 buses run the Vinh-Saigon route; 15 buses run the Vinh-Hanoi route daily, and nearly 80 buses run on routes within the province and to some other provinces. Previously, when gasoline prices were over 22,000 VND/liter, a passenger bus running the Vinh-Hanoi route and vice versa consumed about 5.3 million VND worth of fuel. Now, for the same route, fuel costs have risen to 5.9 million VND. Each sleeper bus costs nearly 4 billion VND to purchase. Each bus has 37 beds, but typically only reaches 70% of its passenger capacity.
Since June, gasoline and diesel prices have been adjusted upwards three times. Although the increase each time was not significant, ranging from 370 to 460 VND per liter, the total increase in just over a month has been 1,250 VND per liter. Previously, there were road maintenance fees, and now, burdened by continuously rising gasoline prices, profits will certainly decrease significantly. However, increasing service fees at this time is quite risky, so we decided not to raise prices to maintain a stable customer base."
Despite rising gasoline prices, taxi companies operating in Vinh City are generally maintaining stable fares. However, for these taxi companies, the drivers are the ones suffering the most (due to the increase in gasoline prices).
Mr. Nguyen Van Phong, a driver for Van Xuan taxi company, said: "Gasoline prices have increased for a month, but the company hasn't adjusted fares yet, claiming the increase is insignificant. However, if you consider the three consecutive gasoline price increases recently, we're losing nearly 600,000 VND each month. Drivers are the ones who suffer the most from the price increase, because we still have to pay the company for radio communication costs and our monthly commission..."
Sharing the same sentiment, Mr. Nguyen Van Hoi, a truck driver transporting construction materials, said: "The investment costs and the price of spare parts are high, so we always have to invest in upgrading and repairing our vehicles to have good quality trucks to compete with other transport companies. The 'small' increase in gasoline prices makes it difficult to raise freight rates, although for large trucks, which consume an average of 50-70 liters of diesel per day, the increase in fuel prices is a significant cost... If gasoline prices are unlikely to decrease, then we will definitely have to consider raising freight rates."
The textile and garment industry is primarily focused on processing, so the simultaneous increase in raw material prices and production costs has caused considerable difficulties for businesses. A garment business owner in the Bac Vinh industrial zone stated that some of one company's products are made from materials supplied by another. When gasoline and electricity prices rise, it causes a chain reaction of increased costs, rather than isolated increases within individual industries. Faced with these challenges, businesses have to accept the lowest possible profit margins to cover additional expenses. The most important thing is to maintain production so that workers have jobs and their livelihoods are secure. Meanwhile, garment businesses often sign production orders with foreign partners at the beginning of the year, or even the previous year, making it impossible to negotiate or change unit prices.
The Vietnam National Administration of Tourism (Ministry of Culture, Sports and Tourism) launched a tourism stimulus program, which was strongly supported by travel agencies and localities. However, the recent increase in gasoline, diesel, and electricity prices has left travel agencies feeling uneasy. The challenge is to adjust tour prices reasonably while still retaining tourists.
According to Mr. Le Quang Hung, Deputy Director of Viet Vision Travel, transportation costs account for the highest percentage of the total cost of a tour program. For tours using airplanes and cars, this cost accounts for approximately 40-50%, or even up to 60% of the tour price if there is a boat trip. In cases where only road transport is used, the cost ranges from 20-25%.
However, in June and July, gasoline and diesel prices increased three times, putting immense pressure on transportation businesses. In fact, during the two previous increases (on June 14th and June 28th), many transportation companies did not raise fares, but with the latest increase on July 17th, and most recently the 5% increase in electricity prices, things are likely to change. The worrying issue for travel agencies is that while the prices of service providers will increase in line with gasoline, diesel, and electricity prices, raising tour prices would put travel agencies at a competitive disadvantage, leading to a decline in both international and domestic tourists. For now, travel agencies are committed to maintaining tour prices, avoiding sudden price increases, eliminating unnecessary expenses in tour programs, and using local guides to reduce travel and accommodation costs, while ensuring quality as promised to customers. However, in the future, if the prices of some other services increase in line with electricity and fuel prices, tour prices will certainly not be able to remain the same as they are now...
Businesses in the service sector, such as supermarkets, restaurants, and hotels, are also facing numerous concerns as input fuel costs increase. Electricity prices are rising, but product prices cannot be raised due to a sharp decline in market demand. This will add further pressure on businesses in their struggle for survival. This is not the first time businesses have dealt with the difficulties of inflation and rising prices. Lessons learned from previous economic crises have helped businesses find ways to adapt. For survival, businesses always recognize this as a common difficulty not only for themselves but for the entire community. Therefore, restructuring management and investment effectively, minimizing unnecessary costs, and implementing thorough cost-saving measures are effective solutions for businesses in their "survival" battle against the "price storm" of electricity and gasoline.
Ngoc Anh
