The impact of EU’s Mobility Package on transportation costs

The most recent restrictions regarding the Mobility Package already have substantial influence on road freight operations in Europe, placing more pressure on capacity and rates.

The Mobility Package is a set of EU rules that attempts to eliminate price discrimination in the road transportation sector while also improving working conditions for drivers throughout Europe. The most recent restrictions already have substantial influence on road freight operations in Europe, placing more pressure on capacity and rates.

We reported here on the exact regulations that came already into force and the ones in the near future: New EU regulations for Road Freight Transports in 2022

Mobility Package: Consequences for capacity

Because of the capacity constraints that have developed over the past months, the situation is projected to deteriorate further as fewer vehicles are able to do cabotage excursions as a result of the return home policy for trucks: Following the implementation of this rule, vehicles would be required to return more frequently to the operational center in their current state of establishment, potentially resulting in an increase of 2 percent in vehicle journeys in comparison to the business-as-usual case, as determined by a study commissioned by the European Commission.

 

The rule is projected to reduce market capacity because vehicles will be required to return to their home countries and may be forced to run on empty during their return journeys. Eastern European hauliers, in particular, will be adversely affected, and they may find it difficult to secure extra cargoes for their return voyages due to the limited market prospects available to and from their operational centers. It is also projected that the cooling off phase for cabotage operations will result in a reduction in domestic capacity.

The effect of lower capacity on costs and rates

As the balance of supply and demand shifts in favor of suppliers, the capacity squeeze is likely to result in an increase in costs for consumers. Furthermore, further vehicle journeys entail additional expenses of their own (e.g. fuel, tyres, drivers, etc.). As a result, it is projected that rates will rise as hauliers pass on the higher costs associated with the new return home policy for trucks. Hauliers based in Eastern European countries may be more willing to partially absorb increased expenses in order to maintain their competitive advantage over the rest of the market, which has been less adversely affected by the new law.

It is projected that Eastern European hauliers will operate 99.8 percent of the vehicles involved in cycles lasting more than eight weeks. These vehicles are expected to be the most adversely affected by the provision since they are currently not in compliance with the new requirement and would thus be required to return home more frequently as a result of the provision.

The requirement for drivers to post their locations will further put pressure on expenses. Because the minimum salary in the destination country is greater than in the home country, operators will incur higher driver costs when operating outside of the home country.

Conclusion

Overall, while the new laws of the Mobility Package are expected to enhance the working conditions of drivers, they are also expected to restrict capacity and increase the cost of transportation. Trucking companies have already begun making modifications in order to comply with the most recent laws in place. Given the existing challenging operating climate, which includes rising fuel and raw material costs, the issues associated with sourcing capacity, as well as the accompanying increases in freight costs, are expected to persist for some time.

Mobility package
The EU’s Mobility Package is one of the most extensive reforms in recent years for important rules in road transport.
Janine Wolff
Janine Wolff is a business economist and design enthusiast, has a passion for blogging and logistics and is our Social Media and Content Manager at Saloodo!.

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