With drivers losing 102 hours to gridlock last year, New York City is second only to Istanbul in the rankings of most congested cities, according to the INRIX 2024 Global Traffic Scorecard — a frustrating distinction for NYC drivers. Taking cues from the likes of London, Singapore, and Stockholm, NYC has rolled out congestion pricing in an attempt to reduce traffic, travel time, and emissions in Manhattan.
As of January 5th, 2025, vehicles entering the Congestion Relief Zone — local streets and avenues at or below 60th Street, encompassing high-traffic areas such as Times Square, SoHo, Hell’s Kitchen, and Chinatown — during the peak periods of 5am to 9pm on weekdays and 9am to 9pm on weekends are charged a toll; outside of this timeframe, drivers are charged the reduced overnight toll rate (75% less than peak rates).
Looking beyond the impact on commuters, distribution-focused companies will take the greatest financial hit. While the initiative is projected to reduce vehicles entering the Congestion Relief Zone by 80,000 every day, boost traffic speeds, and decrease wasteful idling, emissions, and fuel consumption in line with the transportation industry’s sustainability goals, how will congestion pricing impact the slim margins of distribution-focused companies — and what actions are distributors taking to soften the blow?
The bottom-line impact
For companies making deliveries within the Congestion Relief Zone, such as wholesale food and beverage deliveries that are the lifeblood of Manhattan restaurants and bars or national carriers distributing parcels to retailers and offices, congestion pricing is a challenging financial speedbump.
Trucks carry the heaviest toll load: small commercial vehicles (e.g., delivery vans) are charged $9 during the peak period, while small (single-unit) trucks and large (multi-unit) trucks pay a toll of $14.40 and $21.60, respectively. Looking at the bigger picture, small trucks could incur approximately $4,500 annually, while larger trucks may face a cost of more than $6,700 per year. For a fleet of 20 trucks, this could add up to nearly $135,000 annually—a sizeable hit to distributors’ paper-thin margins.1
Given that most customers will want deliveries during the peak hours of 5am-9pm, distributors will struggle to absorb these costs and may ultimately pass them on to their customers to protect profits. For carriers and distributors alike, the additional expense of congestion pricing may be passed on as a rate increase or delivery charge, (e.g., a flat fee, akin to fuel surcharges).
To ensure these surcharges are allocated to the correct customers, distributors will need to adapt their mobile and telematics strategies to enable the logistics team to automatically validate total congestion charges, review which routes actually traversed below 60th St., and reconcile with EZPass statements.
Night owl deliveries?
To mitigate the financial impact of congestion pricing, distributors have been forced to rethink their transportation strategies to improve efficiency, maximize vehicle utilization, and identify creative options to limit the exposure to costly tolls. For instance, some distributors may shift to off-peak deliveries to take advantage of the 75% price reduction (e.g., $5.40 for a large truck vs. $21.60 during the peak period). With fewer vehicles on the road and the possibility of parking closer to the delivery point during off-peak hours, companies moving to overnight delivery should be able to increase delivery speed and reduce costly commercial parking violations — which, back in 2019, were a whopping $123M in New York City.
While the cost savings during off-peak times are undeniable, weekday deliveries during the 9pm-5am period tend to disrupt established workflows and may not be welcomed on the receiving end. Indeed, off-peak deliveries require distributors’ customers to allow unattended overnight deliveries or ensure staff stay late to manage receipt of goods, which could increase labor costs to cover overnight shifts. Zach Miller, VP of Government Affairs at the Trucking Association of New York, rightly noted that not every business can staff a loading dock or freight elevator at two in the morning — and who wants to be woken up in the middle of the night to buzz in an Amazon driver?
Route optimization in the spotlight
Maximizing operational efficiency is top of mind for distributors facing a toll-driven spike in their transportation costs. Notably, NYC’s congestion pricing presents an opportunity for distributors to take a close look at how their routes are structured, especially around the number of deliveries per week they make to each customer, and to consider leveraging a strategic route optimization tool to simplify and expedite the route planning and execution process.
Indeed, automating route planning to optimize delivery routes and asset utilization can help boost efficiency and productivity to offset the impact of congestion charges. By evaluating customers that require frequent small deliveries and re-optimizing them to receive fewer larger deliveries, distributors can reduce the number of trips into Manhattan to minimize toll charges.
If gridlock eases and windshield time decreases with better traffic flow, distributors will be able to add additional stops to each route while retaining a similar route runtime. Similarly, with the help of a route optimization tool, delivery companies can maximize truck capacity and fleet utilization to drive productivity, performance, and growth.
Re-evaluating distribution workflows
Distributors may choose to shake up their delivery workflows and get creative with final mile strategies to minimize congestion charges. By establishing a distribution hub to drop products during off-peak times, companies can leverage micro-mobility delivery options to execute the last mile delivery leg below 60th Street. For example, a national carrier like UPS or FedEx could elect to secure real estate in Manhattan to do large drops between 9pm and 5am, using fewer, higher-capacity trucks and taking advantage of the 75% congestion pricing discount; final mile delivery could be executed by smaller, alternative delivery vehicles, such as motorcycles, bicycles, and smaller light-duty vehicles.
The fallout from NYC’s congestion pricing is yet to be determined. Perhaps, like London, Manhattan will slide back to the same levels of congestion in 20 years. Regardless, in the immediate term, shippers and logistics companies need to finetune their distribution strategies, with a focus on last mile, to make sure they have the policies, systems, and technologies in place to optimize delivery efficiency, boost productivity, and protect margins from the impact of congestion pricing.
Cyndi Brandt is VP Fleet Solutions at Descartes.
1 Descartes estimates based on delivery frequency of 6 days/week x congestion price x number of vehicles.
Navigating NYC Congestion Pricing: The Impact on Distribution Operations
With drivers losing 102 hours to gridlock last year, New York City is second only to Istanbul in the rankings of most congested cities, according to the INRIX 2024 Global Traffic Scorecard — a frustrating distinction for NYC drivers. Taking cues from the likes of London, Singapore, and Stockholm, NYC has rolled out congestion pricing in an attempt to reduce traffic, travel time, and emissions in Manhattan.
As of January 5th, 2025, vehicles entering the Congestion Relief Zone — local streets and avenues at or below 60th Street, encompassing high-traffic areas such as Times Square, SoHo, Hell’s Kitchen, and Chinatown — during the peak periods of 5am to 9pm on weekdays and 9am to 9pm on weekends are charged a toll; outside of this timeframe, drivers are charged the reduced overnight toll rate (75% less than peak rates).
Looking beyond the impact on commuters, distribution-focused companies will take the greatest financial hit. While the initiative is projected to reduce vehicles entering the Congestion Relief Zone by 80,000 every day, boost traffic speeds, and decrease wasteful idling, emissions, and fuel consumption in line with the transportation industry’s sustainability goals, how will congestion pricing impact the slim margins of distribution-focused companies — and what actions are distributors taking to soften the blow?
The bottom-line impact
For companies making deliveries within the Congestion Relief Zone, such as wholesale food and beverage deliveries that are the lifeblood of Manhattan restaurants and bars or national carriers distributing parcels to retailers and offices, congestion pricing is a challenging financial speedbump.
Trucks carry the heaviest toll load: small commercial vehicles (e.g., delivery vans) are charged $9 during the peak period, while small (single-unit) trucks and large (multi-unit) trucks pay a toll of $14.40 and $21.60, respectively. Looking at the bigger picture, small trucks could incur approximately $4,500 annually, while larger trucks may face a cost of more than $6,700 per year. For a fleet of 20 trucks, this could add up to nearly $135,000 annually—a sizeable hit to distributors’ paper-thin margins.1
Given that most customers will want deliveries during the peak hours of 5am-9pm, distributors will struggle to absorb these costs and may ultimately pass them on to their customers to protect profits. For carriers and distributors alike, the additional expense of congestion pricing may be passed on as a rate increase or delivery charge, (e.g., a flat fee, akin to fuel surcharges).
To ensure these surcharges are allocated to the correct customers, distributors will need to adapt their mobile and telematics strategies to enable the logistics team to automatically validate total congestion charges, review which routes actually traversed below 60th St., and reconcile with EZPass statements.
Night owl deliveries?
To mitigate the financial impact of congestion pricing, distributors have been forced to rethink their transportation strategies to improve efficiency, maximize vehicle utilization, and identify creative options to limit the exposure to costly tolls. For instance, some distributors may shift to off-peak deliveries to take advantage of the 75% price reduction (e.g., $5.40 for a large truck vs. $21.60 during the peak period). With fewer vehicles on the road and the possibility of parking closer to the delivery point during off-peak hours, companies moving to overnight delivery should be able to increase delivery speed and reduce costly commercial parking violations — which, back in 2019, were a whopping $123M in New York City.
While the cost savings during off-peak times are undeniable, weekday deliveries during the 9pm-5am period tend to disrupt established workflows and may not be welcomed on the receiving end. Indeed, off-peak deliveries require distributors’ customers to allow unattended overnight deliveries or ensure staff stay late to manage receipt of goods, which could increase labor costs to cover overnight shifts. Zach Miller, VP of Government Affairs at the Trucking Association of New York, rightly noted that not every business can staff a loading dock or freight elevator at two in the morning — and who wants to be woken up in the middle of the night to buzz in an Amazon driver?
Route optimization in the spotlight
Maximizing operational efficiency is top of mind for distributors facing a toll-driven spike in their transportation costs. Notably, NYC’s congestion pricing presents an opportunity for distributors to take a close look at how their routes are structured, especially around the number of deliveries per week they make to each customer, and to consider leveraging a strategic route optimization tool to simplify and expedite the route planning and execution process.
Indeed, automating route planning to optimize delivery routes and asset utilization can help boost efficiency and productivity to offset the impact of congestion charges. By evaluating customers that require frequent small deliveries and re-optimizing them to receive fewer larger deliveries, distributors can reduce the number of trips into Manhattan to minimize toll charges.
If gridlock eases and windshield time decreases with better traffic flow, distributors will be able to add additional stops to each route while retaining a similar route runtime. Similarly, with the help of a route optimization tool, delivery companies can maximize truck capacity and fleet utilization to drive productivity, performance, and growth.
Re-evaluating distribution workflows
Distributors may choose to shake up their delivery workflows and get creative with final mile strategies to minimize congestion charges. By establishing a distribution hub to drop products during off-peak times, companies can leverage micro-mobility delivery options to execute the last mile delivery leg below 60th Street. For example, a national carrier like UPS or FedEx could elect to secure real estate in Manhattan to do large drops between 9pm and 5am, using fewer, higher-capacity trucks and taking advantage of the 75% congestion pricing discount; final mile delivery could be executed by smaller, alternative delivery vehicles, such as motorcycles, bicycles, and smaller light-duty vehicles.
The fallout from NYC’s congestion pricing is yet to be determined. Perhaps, like London, Manhattan will slide back to the same levels of congestion in 20 years. Regardless, in the immediate term, shippers and logistics companies need to finetune their distribution strategies, with a focus on last mile, to make sure they have the policies, systems, and technologies in place to optimize delivery efficiency, boost productivity, and protect margins from the impact of congestion pricing.
Cyndi Brandt is VP Fleet Solutions at Descartes.
1 Descartes estimates based on delivery frequency of 6 days/week x congestion price x number of vehicles.
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