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German premium car manufacturer Mercedes-Benz’s decision to cut its freight costs by 10% from 1 February, resulting in a corresponding reduction in freight rates, has caused uproar among the country’s SME road hauliers serving the industry; they see the move as squeezing already slim margins further.

Industry federation BGL claimed such a move, thought to be industry-wide, lacke legitimacy and it would push its members out of a market of “ruinous” rates in favour of low-cost providers from Eastern Europe, and urged the premium car brand to reconsider.

“The failings of the automotive industry and its cost-cutting moves should not be made on the back of the transport sector. The (stagnant) German economy and German SMEs will not be revitalised by ‘dumping’ practices,” it said.

A spokesperson for BGL said its members “already had their backs to the wall”, the German authorities having doubled motorway toll charges for trucks last year, which increased annual operational costs by approximately €20,000 per vehicle and further eroded the already slim profit margins of road freight transport, which range between 0.1% and 2%.

“Those who cannot go along with this [cut in rates] will probably lose business to Eastern European low-cost providers which often pay their drivers ‘starvation’ wages, far below the minimum wage. This form of ‘dumping’ competition is unworthy of a German premium brand like Mercedes-Benz.”

Mercedes’ move to reduce freight costs reflects a general response among automakers to the significant downturn in a European automotive industry confronted with stiff competition from China and weakening demand for electric vehicles. Last year, manufacturers in Europe, together with their suppliers, closed plants and cut jobs.

Contacted by The Loadstar, Mercedes-Benz highlighted the automotive industry’s “challenging global environment”, but said it could not confirm the BGL’s figure of a 10% reduction in freight costs, as the “public dissemination of internal information regarding business relationships” is not permitted from an EU anti-trust perspective, as it constitutes an illegal signal to the market.

“Please understand that we cannot comment further on this matter,” a spokesperson explained, but added: “However, it is generally applicable that in all our framework agreements with LSPs we require our suppliers to strictly comply with all legal regulations. Additionally, all suppliers working for Mercedes-Benz are subject to continuous compliance checks and risk-based audits.”

In tenders, the group performs a reference calculation as a plausibility check to prevent dumping on prices.

The spokesperson said: “With Mercedes-Benz’s contractual provisions for transport service providers, the service provider undertakes to ensure that each of its subcontractors and other subcontractors meet the legal requirements on the minimum wage for its employees.”

The Loadstar also approached the Brussels-based Association of European Vehicle Logistics (BCG) on cost-cutting by automakers and the impact this is having on rates for transport and logistics services.

However, it declined to respond to questions, only noting: “We are not commenting on commercial issues between customers and our members, as it is not our subject and purely a matter between contract partners.”

ING’s senior sector economist, transport and logistics, Rico Luman told The Loadstar European unit car production had been hovering between 75%-85% of its pre-pandemic output for the past five years, with little prospect of that changing any time soon.

“LSPs and hauliers have for some time felt the pain of lower unit production in automotive, but contract rates were decent and pretty much stabilised moving into 2024. Since then, carmakers’ profit margins have dropped and they have become much more active in reducing costs, and this has cascaded down to their suppliers in transport and logistics,” he noted.

A difficult 2023 and a sluggish 2024 in road transport – particularly in Germany, with a decline in demand from shippers in manufacturing – had led to excess capacity in trucking.

“While volumes are bottoming out and we see some mild new traction coming through in road mileage figures, pushed by consumer products, it remains a buyer’s market (for haulage capacity). The negotiating position of hauliers for contracts reaching through to 2025 isn’t strong.

“This could change once the economy in Germany picks up and shippers are keen once again to secure capacity, which could see the return of truck driver shortages. But, given the subdued (economic) outlook, I don’t expect that just yet.”

Mr Luman added: “Trucking is a low-margin business, so absorbing a significant ‘haircut’ will be difficult. LSPs have higher margins, but probably won’t take the majority of it. The outcome could be more insolvencies among SMEs and even more haulier activity shifting to companies or subsidiaries based in Eastern Europe.”

Stuart Todd is a freelance journalist based in France, he has written extensively for The Loadstar for many years.

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  • Jakub Zawidzki

    February 03, 2025 at 9:47 am

    Very interesting.
    I thought contracts are bilateral and customer can’t decide about rates by himself. Something I don’t understand here.
    Secondly there is one very worrying and short term vision conclusion coming from this article: thread are Central and Eastern carriers who are part of European Union, not Chinees forwarders growing on our market, not duties which will be imposed by USA.
    How short term and stupid approach in western Europe and Germany there is. Very disappointing.
    Instead of being united and face external risk, defend European market we will fight internally. IN Washington, Pekin and Moscow they are already opening Champagne, celebrating stupidity of EU.