Tough times and tougher markets?

Interesting and challenging times lie ahead for new commercial vehicle manufacturers and road transport operators, says VIC OLIVER.

With many truck and bus manufacturers planning for major growth in new commercial vehicle sales over the next four years, against a background of a staggering world economy, we could soon be witnessing some interesting and challenging times in the commercial vehicle industry.

Added to the staggering economy, we have a depreciating rand, high and fluctuating fuel prices, and a low-growth economic forecast in South Africa for the next few years – with no firm indications of when the world economy will stabilise.

Another threat to some segments of the road freight industry is the South African government’s determination to get more freight back onto rail. Long distance road transport, tanker and car-carrying operators have already felt the effects – losing some freight contracts to rail and pipeline modes of transport.

The question that has to be asked is: will the estimated 25 truck and bus manufacturers that are all competing in one of the most competitive vehicle markets in the world survive these tough times? Especially as the more established manufacturers, who presently enjoy the lion’s share of the market, are determined to increase their market share.

The fierce competition is also forcing truck and bus manufacturers to continually improve their product quality and back-up service. This is good news for road transport operators, as it gives them a wider choice of vehicles to meet their needs. They can now purchase new vehicles with the assurance that the product is reliable and backed by good after-sales service.

Lately, we have witnessed the following product support improvements from the majority of commercial vehicle manufacturers:
• New vehicle warranties have been extended
• Parts supply has improved
• Competitive vehicle maintenance contracts have been introduced by some suppliers
• Roadside assistance is now offered
• Improved nationwide networks of supporting dealers
• Upgrading of vehicle specifications.

Many truck and bus dealers are cutting new vehicle prices in order to win business in this highly competitive market.

This may appear to be good news for the buyer – but without a fair profit margin, will dealers still be able to offer the requisite levels of product support; in fact, can they survive? Without a fair profit margin, manufacturers and dealers cannot afford to hold sufficient parts and provide all the necessary support systems.

In these tough financial times, road transport operators are also facing stiff competition from other operators – and rising costs. To counteract these tough times, operators are continually endeavouring to maximise vehicle uptime and productivity. Optimising vehicle uptime can only be achieved if the truck manufacturer and its dealer support network can offer world-class vehicle back-up service. But can vehicle manufacturers and dealers continue to provide world-class back-up service if their profit margins are continually being eroded?

I predict that in the next few years we could see some interesting changes taking place in the South African truck and bus market.

Firstly, we could see the market becoming too tough for some manufacturers and they could decide to retract from the market. Secondly, we could see those manufacturers who are determined to gain a bigger share in this perceived lucrative market introduce more competitive models and dilute the market share that some of the more established truck and bus manufacturers presently enjoy. And, thirdly, we could see more dealers becoming multi-franchised.

Hopefully, we will not see the level and quality of vehicle back-up service diminishing.

One of this country’s most respected commercial vehicle industry authorities, VIC OLIVER has been in this industry for 49 years. Before joining the FOCUS team, he spent 15 years with Nissan Diesel, 11 years with Busaf and seven years with International.