Bus Load

Freed to Enter Market, Discount Bus Operators Clog Germany's Highways

  • Why it matters

    Why it matters

    The German market for long-distance bus travel is fragmented and prices are extremely low, which is great news for travelers but bad rail and bus operators trying to make a profit.

  • Facts

    Facts

    • Germany’s bus market was deregulated in 2012, leading to a proliferation of bus companies and price dumping.
    • A consequence of the price war and rapid growth is that there are not enough drivers to drive all of the buses on the roads.
    • Market observers expect the market of more than 4,000 operators to eventually cooperate.
  • Audio

    Audio

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Bus ad for Berlin Linien Bus, one of the many express companies now competing with Deutsche Bahn. Source Berlinlinienbus.de

 

Up and down the highways of Germany, there have never before been so many buses: orange ones, yellow ones, green ones, in all, some 200 lines connect the country’s main cities.

Germans have long been enthusiastic users of public transport services to travel around the country. But until deregulation of the bus market in 2012, travelers in Germany who weren’t driving cars tended to go places by train.

When market restrictions were lifted, bus travel suddenly became popular and cheap. Travelers can go by bus from Hamburg to Berlin for €8 ($10) or across the country from Freiburg to Munich for €7.

But the market has become fragmented with an unsustainable number of providers.

In all, 4,500 firms offer intercity services. Many are family businesses which own fewer than a dozen buses. But bigger investors have also discovered people’s new interest in bus travel and 42 firms now have 60 percent of the market.

The larger providers have often calculated their budgets so tightly that they do not own their own fleet but instead pay regional providers to run the service and repaint their buses.

“Competition on the market is so intense that not all of the providers can survive, also because of dumping prices,” said Wolfgang Steinbrück, president of the association of bus companies. Prices should be three times higher than the lowest available to cover providers’ costs and make a small profit, according to Mr. Steinbrück’s calculations.

For now, travelers enjoy the benefit of competition. The low prices are combined with free wireless services, access for the handicapped and plug sockets at each seat. The services are attracting older people, students heading home at the weekend and anyone who has a bit of extra time and is keen to save some money.

When market restrictions were lifted, bus travel suddenly became popular and cheap. Travelers can go by bus from Hamburg to Berlin for €8 ($10) or across the country from Freiburg to Munich for €7.

None of this is good news for Germany’s main rail provider, a former monopolist that still has an extensive grip on the rail market. The train company, Deutsche Bahn, had also had exclusive rights to offer bus services and runs two lines.

Now, the people who used to travel by train, which is more expensive, are opting for the bus instead. Last year, nine million people decided against the high speed, high cost intercity rail services.

That may be a small proportion of the 131 million people who travel by train through Germany each year. But one in every three people who takes the bus used to be taking one of the more costly long distance trains. And one in every seven people who travelled by regional train now takes the bus.

Deutsche Bahn underestimated how much the market for bus travel would grow. This miscalculation cost the firm €50 million ($66.9 million) in the first six months of the year as travelers opted to take the bus rather than the train.

The rail provider itself offers two bus services, BEX and IC Bus and until recently was one of the main providers on the bus market. Now the train service only has 15 percent of the market for long distance bus travel, according to ICES, a market researcher.

 

Bus company BEX is one operator challenging Deutsche Bahn for intercity transport in Germany. Source BEX

 

The rail provider itself offers two bus services, BEX and IC Bus and until recently was one of the main providers on the bus market. Now the train service only has 15 percent of the market for long distance bus travel, according to ICES, a market researcher.

The rail provider tried to counter the trend towards the bus by offering lower cost tickets but is struggling to compete with the low prices for bus travel. That is partly due to the higher fixed costs associated with the rail infrastructure, said a spokesperson for Deutsche Bahn.

According to a recent study by the Allensbach institute which tests public opinion on issues, one in every two people in Germany would consider travelling by bus or has done so already. This is three times as many bus travelers as one year ago. Market observers expect some 25 million people will travel by long distance bus by 2030.

One immediate difficulty is drivers. There is already a shortfall of 2,000 drivers and in the coming years, 10,000 new drivers will be needed, according to an industry association.

But the low prices and competition on the bus market won’t last forever. Larger providers already have 60 percent of the market and further consolidation is likely to edge out smaller providers. Prices will go up and only in the medium term will it become clear how far it makes sense to go by bus or travel by train or car.

In the meantime, Germans are still enjoying inexpensive bus travel – as long as there are enough drivers.

 

 

 

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