With the approval of China’s State Council and Ministry of Transport, highway tolls throughout China resumed at 0:00 on May 6. Before this, in order to control the COVID-19 virus as well as economic and social development, nationwide highway tolls were suspended at 0:00 on February 17 in China.
Due to the effects of the COVID-19 virus and the policy of free highway tolls, earnings of companies listed in the Shanghai and Shenzhen stock exchanges under the highway industry during the first quarter of 2020 are decreasing. For example, China Merchants Expressway Network & Technology Holdings Co., Ltd (CMET) suffered a loss of RMB 700 million in the first quarter of 2020. Many highway companies’ shares universally dropped. China Merchants Securities believed that in the long term, highway enterprises mainly depend on the general economy of China. With the reduction of the COVID-19 virus, traffic flow and highway tolls will return to normal.
Two types of vehicles will continue to enjoy the free highway toll policy. The first type consists of vehicles used to transport emergency materials, such as disinfectants, medical equipment and medical instruments. The second type consists of vehicles used to transport daily supplies and products. For these vehicles, highway toll stations will set up an exclusive expressway to ensure that these vehicles have priority to pass through toll checkpoints.
According to the Regulation on the Administration of Toll Roads, the charging standard for vehicles on each highway should depend on the classification of the highway, the total monetary investment in the highway, the local price index, traffic volume and other factors.
Vehicles used to transport fresh agricultural products, crop transplanting vehicles, and internationally standardized cargo trucks must apply for the free highway toll policy. Eligible vehicles need to first make an appointment for the application. After passing a highway toll station, the vehicles need to move to a specific location for inspection, and afterward they will enjoy the preferential policy after their status is confirmed. Those vehicles which are eligible for the free highway toll policy but have not applied for toll exemption will have to pay first at a highway toll station and be refunded later.
Coronavirus causes highway industry to plunge during first quarter of 2020
A report released by CMET showed that the company’s revenue in the first quarter of 2020 was RMB 870 million, which was a decrease of 49.1% compared to the same period last year. The net profit in 2019 was RMB 102.8 million. CMET stated that under the effects of the COVID-19 virus, many people are not willing to travel, which has led to suspension of interprovincial passenger vehicles. The delay of work resumption also has affected the highway industry. In addition, the free nationwide highway toll policy during the outbreak of the COVID-19 virus has also caused a significant increase in CMET’s first quarter revenue during 2020.
Other highway enterprises such as Shenzhen Expressway Company Limited, Guangdong Expressway Network, Anhui Expressway Company Limited, Hubei Chutian Smart Communication Co., Ltd also failed to meet goals during the first quarter of 2020. Statistics also showed that many A-share listed highway companies except Heilongjiang Transportation Development Company Ltd. suffered an average loss of RMB 1.3 billion, with CMET suffering the biggest loss.
Highway industries expect to boom as travel resumes
With the rapid resumption of traffic flow on nationwide highways, profits of many highway enterprises are expected to have an upturn. The total daily traffic volume throughout China increased from 5.4 million on February 16 to 33.6 million on March 31. In March, the traffic flow on nationwide highways saw an increase of 10% compared to same period last year. However, the volume of passenger traffic in railway and airlines saw a decrease of 75% and 73% respectively compared to the same period last year.
For more information on the impact of COVID-19 on China’s industry, please check our COVID-19 Global Monitoring.