The European transport margin squeeze: costs up, rates flat, operators absorbing everything

The cost side of the equation

Running a truck across Europe has never been cheap, but the cost structure has shifted significantly over the past few years. The increases are not concentrated in one area — they are spread across every line item in the operating budget.

Diesel

Fuel typically accounts for 25–35% of total operating costs for a road transport operator. When diesel prices spiked in 2022 following the energy crisis, many operators were caught with contracts that did not adequately account for the increase. Prices have partially normalised since then, but they remain structurally higher than the 2019 baseline that many long-term contracts were priced against.

The volatility itself is a problem. A carrier pricing a lane in January cannot know what diesel will cost in June. If the contract does not include a well-structured fuel surcharge clause, the carrier absorbs the difference. Many contracts still do not have adequate FSC provisions — or have them in theory but with reference prices and adjustment frequencies that lag the market by weeks or months.

Tolls

Toll costs across Europe have been rising consistently. Germany expanded its Maut network to include federal roads in 2024, significantly increasing the chargeable distance on routes that previously avoided motorways. Austria has raised its pass surcharges. Several Eastern European countries have updated their HGV rate tables upward.

For a carrier running high-volume cross-border lanes, the cumulative toll increase over the past three years can amount to thousands of euros per truck per year. This is not a one-time shock — it is a permanent structural cost increase that compounds annually.

Drivers

The driver shortage in Europe is well-documented. The practical consequence for operators is that driver wages have increased significantly, particularly for experienced international drivers. In markets like Germany, the Netherlands, and the Nordics, driver costs have risen 15–25% over the past three years. Operators in lower-wage countries who supply drivers to Western European markets are also seeing wage pressure as drivers increasingly demand pay that reflects the cost of living in the countries they operate in.

Compliance and environmental costs

The regulatory environment has added new costs that did not exist five years ago. Low Emission Zones in major cities require newer, cleaner vehicles — or charge older ones to enter. The EU's Carbon Border Adjustment Mechanism and broader decarbonisation pressure is pushing operators toward Euro 6 and eventually electric or hydrogen vehicles, which carry higher capital costs. The transition timeline is uncertain, but the direction is not.

The rate side of the equation

Against this backdrop of rising costs, freight rates have not moved proportionally. The reasons are structural and unlikely to change quickly.

Overcapacity and competition

European road freight is a highly fragmented market. There are tens of thousands of operators, ranging from single-truck owner-operators to large fleets. The barriers to entry are relatively low — a truck, a licence, and a willingness to undercut the next carrier. This fragmentation creates persistent downward pressure on rates, because there is almost always someone willing to take a load for less.

When demand softened in 2023 and 2024, capacity did not exit the market fast enough. Operators who should have been pricing at cost-plus were instead pricing to keep trucks moving, accepting rates that did not cover their full cost base. This behaviour, rational at the individual level, is destructive at the market level — it trains shippers to expect low rates and makes it harder for any single operator to raise them.

Shipper power

Large shippers and freight buyers have significant negotiating leverage. They can run tenders that pit carriers against each other, award volume to the lowest bidder, and switch providers with relatively low friction. In this environment, carriers often feel they have no choice but to accept the rate offered or lose the contract entirely.

The asymmetry is stark: a shipper losing one carrier is an inconvenience. A carrier losing a major shipper can be an existential problem. This power imbalance shapes every rate negotiation in the market.

Fuel surcharges that don't actually cover fuel

Many transport contracts include fuel surcharge clauses, but they are often poorly designed. The reference price may be outdated. The adjustment frequency may be monthly when diesel prices are moving weekly. The consumption rate assumed in the calculation may be lower than actual consumption on the route. The result is a surcharge that nominally exists but does not actually cover the fuel cost increase.

Carriers who do not model their actual fuel costs precisely — by route, by vehicle, by current diesel price — cannot know whether their FSC is adequate. Many are not. They are effectively subsidising their customers' freight costs out of their own margins.

What the margin looks like in practice

Net margins in European road freight have historically been thin — 2–5% for well-run operators, often less. When costs rise faster than rates, those margins compress toward zero or below.

The routes most exposed are the long cross-border corridors where toll costs are highest and where the gap between the rate agreed months ago and the current cost of running the route is widest. A Warsaw–Lyon run that was priced at €1,800 in a contract signed 18 months ago may now cost €2,100 to operate when you account for current diesel, updated German Maut rates, and driver costs. The carrier is running that route at a loss on every trip, but the contract does not expire for another six months.

This is not a hypothetical. It is the situation many operators are in right now. Some are managing it by renegotiating contracts where they can. Others are absorbing the loss and hoping conditions improve. A significant number are simply not surviving — the rate of insolvencies in European road freight has been elevated for two years running.

Why merchandise is getting more expensive — and who is paying for it

Transport costs are embedded in the price of almost everything. When a supermarket receives a delivery, the cost of that delivery is built into the price on the shelf. When a manufacturer ships components across Europe, the freight cost is part of the product cost.

As transport costs rise, those increases eventually flow through to consumer prices — but the transmission is slow and uneven. In the short term, it is the transport operators who absorb the increase. They cannot immediately pass it on because their contracts are fixed, their customers have alternatives, and the market is too fragmented to coordinate a price increase.

Over time, the costs do move through the supply chain. Goods become more expensive. But by the time that happens, the operators who absorbed the initial squeeze may already be gone. The industry consolidates — not through planned efficiency gains, but through the failure of the operators who could not survive the transition period.

What operators can do

There is no easy answer to a structural market problem. But there are things operators can do to protect their position.

The first is to know their actual costs, precisely, by route. Not an average cost per kilometre — the actual cost of running a specific truck on a specific lane, including current toll rates, current diesel prices in each country crossed, and the correct vehicle parameters. Many operators are still working from estimates and rules of thumb that were calibrated years ago and no longer reflect reality.

The second is to price fuel surcharges correctly. This means using current diesel prices (not last month's), the right consumption rate for the route, and a reference price that reflects what the contract was actually priced at. A surcharge calculated on stale data is not a surcharge — it is a partial subsidy.

The third is to negotiate contract terms that allow for cost pass-through. Weekly FSC adjustments tied to a published index. Toll cost clauses that adjust when major networks change their rates. These are not unreasonable asks — they are standard practice in well-structured contracts. Operators who accept contracts without these provisions are taking on risks they cannot control.

The fourth is to identify which routes are actually profitable and which are not. This sounds obvious, but many operators do not have the visibility to answer this question at the lane level. They know their overall P&L, but they do not know which specific routes are subsidising which others. That visibility is the starting point for any rational decision about which business to keep and which to walk away from.