Transport below cost price is causing serious damage, according to a statement issued by the Association of Hungarian Logistics Service Centres. According to the MLSZKSZ, there is no cover for technical expenses and 40-tonne time bombs are speeding along Hungarian roads.

According to a survey of logistics companies carried out by the MLSZKSZ in September this year, road transport below cost price is causing increasingly serious damage to the logistics sector. The pandemic has led to the emergence in Hungary of transport companies, mostly foreign, which offer transport services at 35% below market prices. "At the moment the cost price is around 1.00-1.05 Euro/km, so anyone who is charging less than this is making a loss. If this situation persists, it will lead to the closure of many smaller road haulage companies," said Koppány Ajtony Bíró. The MLSZKSZ secretary general added that about 65% of the Hungarian road haulage market is directly affected by the problem - such is the share of smaller companies with 5-10 cars in the haulage market - but the phenomenon is also causing serious disruption for larger companies, as their international competitiveness is significantly reduced.

The MLSZKSZ examined around 100 transport assignments carried out by its member companies and concluded that it is impossible to provide reliable transport services at a price of €0.65/km instead of €1.00/km, i.e. 35% below the average market price. These prices do not even cover the basic technical and safety costs of transport in the short term. (The cost price indicated here is the average cost price of the transport operations examined by the MLSZKSZ. As the cost price level depends on many parameters, such as the transport relationship, the order specification, the customer requirements or the condition of the vehicle, there may be different cost prices on the market.) 

"Our calculation has produced some hair-raising results. Those who take on and give rides for €0.65/km are in fact sending 40-tonne ticking time bombs on the road at 80km/h, which could explode anywhere and at any time, causing a disaster," stressed Koppány Ajtony Bíró. Such lorries are not covered for basic vehicle maintenance and regular tyre replacement (an average of 12 tyres per vehicle combination every two years. In addition, German and Austrian regulations now require them to be winter weatherproof, which adds to the cost).  Nor does it cover insurance, occasional fines, or the IT and telecommunications costs allocated to the vehicles. No tax will be paid on the vehicles, the company's running costs are not covered by the freight, there is no depreciation accounting, i.e. they cannot replace the outdated vehicles. "They can only pay the driver's salary, fuel and tolls from this amount," the secretary general added. But companies that operate below cost are also likely to force drivers to commit irregularities (over-driving, under-resting, etc.), thus putting other road users at risk. The older the vehicle and the smaller the fleet of the operating company, the greater the likelihood of accidents occurring. 

According to the MLSZKSZ, if the practice of charging below cost price is maintained for a long time and becomes the preferred solution of the principals, more and more vehicles in deteriorating technical condition will be on the roads. Worn, poor-quality tyres lead to poor braking performance, while poor maintenance of engine and on-board systems increases the risk of breakdowns. And chassis failures can lead to road tragedies.

Everyone loses in the long run

According to the association, the lower prices only seem to benefit the customers, but in reality they will be the biggest losers in the medium to long term, as the almost codifiable technical failures mean that their goods will not arrive on time. And the resulting damage will not be covered by insurers, as such carriers are either uninsured or insufficiently insured," the Secretary General pointed out. Shippers will also see their market position deteriorate significantly, losing new business or cancelling business, the negative impact on revenues of which will be many times greater than the freight savings. Smaller, honest companies will be hit hardest by depressed prices, while medium and larger carriers and logistics service providers will suffer indirect negative effects. Lower prices lead to a reduction in firms' liquidity, competitiveness, employment and tax-paying capacity. Overall, all market players will see a reduction in revenues, which will result in a loss of tax revenue for the state of up to several 10 billion forints.

The responsibility lies with all

Under the classic contract of carriage, the carrier is liable for damage caused within the limits of the contract, once the goods have been accepted for carriage and loaded onto the vehicle. At the same time, it is also the moral responsibility of the principal to accept the depressed prices, because he must also be aware of the cost price levels on the road transport market and their negative consequences, stresses the MLSZKSZ. The association calls on principals to strive for safety rather than to cut their costs at all costs, as an accident caused by a technically defective truck could even result in the death of their own relatives. Another solution to the problem is the electronic system for checking transport licences, BIReg, which is currently being tested and will be used to check the transport licences of companies from third countries (e.g. Serbia, Ukraine, Turkey, etc.), but the Association expects significant results only later.