Getting fleets by in 2017

With both fixed and variable operating costs increasing throughout 2016, ANLERIE DE WET explores how fleet managers can make the most of their vehicle finance and insurance in 2017

Operating costs increase every year, but fleet managers and owners need to continuously think of ways to keep their trucks running without cutting corners that could cost lives and loads. Martin Dammann, director at TruckScience, says the composition of fleet operating costs hasn’t changed much over the last year, and that, overall, the costs increased by about five percent.

He says minor changes in the composition of operating costs can be attributed mainly to the increased price of vehicles and vehicle parts, which went up by between ten and 15 percent. This has influenced the minor increase in percentage (one percent) of vehicle finance within the operating costs to 21 percent.

Sid Beeton, divisional transport manager at ONE Insurance, agrees that the high inflation rate on new parts – which are mainly imported and therefore subject to rand devaluation – is one of the biggest contributors to the overall increase in operating costs.

“Extended truck warranties on new vehicles also impact on claims outlay for repairs, as we cannot achieve cost savings for alternative and second-hand parts. The large pool of uninsured motorists on our roads also means that recovery of costs from the guilty party in an accident is hard to achieve, so this opportunity to recover accident outlay is severely restricted,” Beeton says.

“Increased traffic flows and deteriorating road surfaces also contribute to an increase in road accidents,” he adds.

Dammann says: “Along with price increases of vehicles and parts, interest rates have gone up by about 1,2 percent, while costs for maintenance, tolls, crew and insurance are up by 7,03 percent.”

He says although the fuel price went down for a while, it came back up again. The same applies to tyres, as they are linked to the fuel price. Compared to operating costs in 2016, the percentage spent on fuel has gone down by three percent and should comprise only 40 percent of the overall operating costs in 2017.

Dammann gives the operating cost estimate per annum for the MAN TGS 26.480 6×4 BLS (D26) (LX) as an example of what can be expected from the five-percent increase in the overall rate of operating costs. If the MAN TGS travels 144 000 km per annum, carrying 8 880 t, its total operating costs can amount to R2,5 million.

With these increases, Beeton advises fleet managers and operators to “buy into technology”. “As ONE Insurance, we enter into partnerships with our transport clients by encouraging retention of risk for predictable losses, and subsidising their spend on risk management tools – such as on-board camera installations, tracking and load-recovery devices, driver training and a full bureau of services for driver monitoring and other such initiatives,” says Beeton.

He says that ONE Insurance is expecting some developments in 2017 that may create an increase in operating costs in terms of vehicle finance and insurance. “The threat of a downgrade by rating agencies and the volatile political landscape could spike a downward trend on the rand, which could have far-reaching consequences in terms of the price of repairs in the trucking industry,” says Beeton.

He notes that although local sales and repairs will be negatively affected, the weak rand could allow manufacturers and owners to sell second-hand trucks to other African and Asian countries that still use Euro-3 emission standards. He also advises fleet managers and truck owners to prepare themselves to cover costs if a change in insurance regulations increases running costs.

Beeton says: “In the insurance industry itself there are a number of regulatory changes, due to be introduced in 2017, which will increase costs for brokers and insurers. As a consequence, insurers may be exposed to greater capital costs – which may result in them passing on these costs to insured clients.”

Truck operators are advised to prepare, plan and be ready for the year ahead to make sure that they can keep their trucks running in 2017.