40-ton ticking time bombs are roaming on our roads!

Posted by Bíró Koppány Ajtony

There are no funds for the technical maintenance/repair costs: 40-ton ticking time bombs are bowling along the roads

Serious damage in the logistic sector can be caused by road transport carried out below overhead costs, which is the result of the situation brought about by the pandemics – warns the Association of Hungarian Logistic Service Centres  (MLSZKSZ). This practise is widespread among the foreign entrepreneurs – they undertake transport even 35 % below the market price, which distorts the market and causes damage to the clients, the state and as ticking time bombs trucks are highly accident prone. According to the Association this phenomenon is present in about 20 % of the total transport leaving Hungary, which puts the smaller actors of the Hungarian road transport market in a difficult situation, moreover results in grave distortions in the operation of the bigger companies as well.

According to a survey conducted by MLSZKSZ among the logistic companies this year in September, transports taken on below the overhead costs cause more and more serious damage in the logistic sector. Driven by the world pandemics, transport companies, mainly foreign ones, have appeared in Hungary which undertake freight 35 % cheaper than the market prices. „At present the cost level is around 1.00-1.05 Euro/km, if somebody carries freight below this price, they will create losses. If this condition prevails for a longer time, it will result in closing down several smaller transport companies”said Koppány Ajtony Bíró, General Secretary of MLSZKSZ. He also added that this problem directly affects about 65 % of the Hungarian road transport market, as this is the proportion of the smaller transport companies in the market which operate with 5-10 trucks. However, even the bigger companies are hard hit by this phenomenon, as their international competitiveness considerably decreases.

MLSZKSZ examined about 100 transport tasks carried out by its members and came to the conclusion that it is impossible to carry out transport in a reliable way 35 % below the average market price, i.e. instead of 1.00 Euro/km, charging only 0.65 Euro/km.These prices do not cover the basic maintenance and security costs absolutely necessary for safe transport, not even in the short term. (The above overhead cost is the average overhead cost of the transports examined by MLSZKSZ. As overhead costs depend on many parameters – e.g. the transport route, order specifications, client needs or the condition of the vehicle – you can also find different overhead costs in the market.)

Our calculations produced hair-raising results. Those undertaking and carrying out haulage at 0.65 Euro/km, actually send 40-ton ticking time bombs on the public roads, which can explode anywhere at any time and cause a disaster”emphasized Koppány Ajtony Bíró. In the case of these trucks there is no margin left for the most basic maintenance of the vehicles, for insurance, eventual fines, the calculated IT and telecommunication costs, and for the systematic exchange of the tires (which is due every two years, on average 12 tires/vehicle; if we take the German and Austrian regulations into consideration, they have to meet the winter tire requirements, which means additional costs). Therefore they are not going to pay tax on their vehicles; there is no margin in the transport fee left for depreciation, which means the run down old trucks cannot be replaced by new ones. This amount covers only the wages of the driver, the fuel and the toll” – added the General Secretary. What is more, the companies that undertake transport below overhead cost will probably push their drivers to malpractices (driving over the daily limit, shorter break or rest time etc.), which also puts other actors of the public roads to danger. The older the truck and the smaller the fleet of the operating company, the higher the risk of accidents can be.

According to MLSZKSZ if the practice of performing transports below overhead cost continues for a long time and becomes the preferable solution for the clients, more and more transport trucks of poor technical standards will run on the roads. As a result of worn treads and low-quality tires the breaking efficiency diminishes, and resulting from the insufficient maintenance of the motor and the systems the odds for breakdown become higher. A failure in the running gear can lead to tragedy on the road.

Everybody loses in the long run

In the Association’s opinion the low prices are only seemingly favourable for the clients, actually in the medium/long term they will become the major injured party, as their goods will not arrive on time because of the technical problems which are actually coded in this system. Their losses deriving from late delivery will not be covered by the insurance companies as these transport companies have either no insurance at all, or just insufficient coverage – emphasized the General Secretary. The clients’ market position will also substantially worsen; they will lose significant business opportunities, or will have to cancel business deals, the negative effects on the proceeds will be much higher than the transport costs saved.

The depressed prices affect the smaller fair companies the most, whereas in the case of medium and bigger transport and logistic service companies we can speak of indirect negative effects. Resulting from the lower prices the liquidity, compatibility, employment and taxpaying capacities of the companies decrease. On the whole, each market player will have less income, which can add up to more than 1 billion Forint less tax revenues for the state.

Everybody shares responsibility

In terms of a classic transport contract the forwarding company is responsible for any damage caused within the frameworks of the contract once they have taken over the goods for transport and have loaded them on the truck. At the same time it is also the client’s ethical responsibility if they accept the depressed prices, as they also have to be familiar with the overhead cost levels of the road transport market and their negative effects – highlights MLSZKSZ. Therefore the association asks the clients that instead of reducing their costs “at all costs” they should seek safety, as even their family members can fall victim to an accident caused by a technically defect vehicle. A contribution to the solution of the problem can also be BIReg, the electronic transport documents checking system that is currently being tested. For the time being the transport documents of companies arriving from third countries (e.g. Serbian, Ukrainian, Turkish etc.) will be checked, however, the Association expects substantial results from this system only some time later.

Foto source: Mihádák Zoltán | MTI/MTVA

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