Extra-good news for extra-heavies

Extra-good news for extra-heavies

FOCUS speaks to a few local original equipment manufacturers about the current status of the local extra-heavy commercial vehicle (EHCV) sector.

Having thus far grown 8,9 percent year-on-year, it appears the local EHCV sector is set for another year of solid performance. This is good news for the sector as this major, positive trend is set to continue.

“We’ve witnessed continual growth in the EHCV sector since January 2013, so it’s a very positive trend in the market currently,” notes Jason Brunninger, national sales manager at Freightliner.

Rory Schulz, acting MD of UD Trucks Southern Africa, concurs, noting that the company forecast only 4,5 percent growth in this segment. “However, the segment has been consistently performing well (at six to eight percent growth), so far this year,” he
says, indicating that a backlog (following recent strikes in the platinum sector) should drive the segment, currently numbering around 8 087 units, for a few more months.

The segment, says Schultz, should continue showing above-average growth, driven mainly by the recovery in mining, long-haul and construction (energy, road, rail and water related).

That’s not to say the year so far has been smooth sailing. It’s been something of “a double-edged sword”, notes Brunninger. “Even though we’ve seen good performance from Freightliner and the EHCV market as a whole, it’s been challenging as the market is directly affected by foreign exchange rates – it’s continuously about overcoming those challenges. In the last two years we’ve seen depreciation with the rand/dollar, euro, kroner and all the major currencies.”

Schultz explains that external factors– such as slow economic growth, widespread labour unrest, rising interest rates and inflationary pressures– continue to dampen growth in the local truck market.

Why the big upward trend within the EHCV sector, then? Brunninger says: “Some of the current purchasing is possibly the result of replacement cycles. The last major year for sales was 2008, which is in line with a general five-year replacement cycle that is also driving sales this year.”

The South African extra-heavy sector is expcted to continue showing above-average growth.Schultz expands with an interesting observation: “Due to the postponement of Euro-5 implementation to 2020, fleet replacement cycles will be influenced towards the end of the year and going into 2015.

“‘European’ fleets will see the biggest impact. Operators will probably hold onto current vehicles in anticipation of replacing them with Euro-5 vehicles during the next two years … This will not happen anymore, so they might as well replace vehicles in the immediate future and plan to replace them again when the new emissions legislation does come in.”

Another very important factor to consider is the drive to improve efficiencies and the recent trend of consolidation of freight – something which (as we reported last month) is affecting sales in the heavy commercial vehicle (HCV) sector.

“A lot of freight is being consolidated now and moved in bulk rather than by individual operators with smaller applications,” says Brunninger. “I think that is having a considerable influence on EHCVs at the moment as well – if you look at medium commercial vehicle (MCV) and HCV sales, their growth is not as positive.”

Schultz adds yet more food for thought to the mix, stating that the growth in the EHCV market so far this year is also due to continued spending on infrastructure-related projects. Government has spent an estimated R1 trillion over the past five years in this sector, and a further R847 billion is budgeted for infrastructure construction over the next three years. “Truck models that are suited to supporting the development of these infrastructure projects will continue to sell well,” he enthuses.

“Gross Fixed Capital Formation, or GFCF – the new value that is added to the economy – is set to increase slightly during 2014, with the main gains coming from several construction and infrastructural projects,” he continues.

“Government’s New Development Plan (NDP), although it met with mixed reactions, has also now, for the first time, been included in the state budget. This bodes well for the development of a number of the Strategic Infrastructure Projects identified by government,” adds Schultz.

These include 18 projects ranging from geographically focused developments, to social infrastructure, knowledge, water and sanitation. “Most of these projects require heavy involvement by the transport industry, which could once again have a positive impact on the potential growth of the market,” he says.

Whichever why you dissect it, the market certainly is showing great resilience. Brunninger sums it up thus: “The nature of transport is that product needs to be moved on road and thus we’re seeing a positive trend in our sector and our segment.”

Published by

Focus on Transport

FOCUS on Transport and Logistics is the oldest and most respected transport and logistics publication in southern Africa.
Making a splash
Prev Making a splash
Next Truck manufacturers – who will endure?
Truck manufacturers – who will endure?