Things are looking just dandy at Isuzu Truck South Africa. What a pity that the same cannot be said of our country ...
It was a pleasure to attend Craig Uren’s annual State of the Nation address. I say this for three reasons: the chief operating officer of Isuzu Truck South Africa makes sense, he has a proper understanding of figures (he can even pronounce them) and he is both straightforward and honest. As such, it’s an annual affair that I look forward to.
This year’s gathering didn’t disappoint, with Uren being typically candid and entertaining. “What has changed since this time last year? Not much! Our gross domestic product is still under pressure, businesses still don’t want to invest, the pressure on government to reduce spending remains, we were getting downgrades – and they’re getting worse – and unemployment remains a challenge.
“The first six months of 2015 was a wonderful place to be. The last six months (particularly the last quarter) were interesting to say the least. As a result of the financial turmoil, we are seeing retrenchments, closures and buyouts. Please note that there is a blood transfusion bar outside. Donate your blood and don’t spill it on the carpet when you slash your wrists,” he said with a wry grin.
On a serious note, though, Uren painted a picture that mixed good with bad. Let’s kick off with the good news first. “We have a lot to celebrate today: 100 years since inception of Isuzu, the tenth birthday of Isuzu Truck South Africa and the fact that we are the number one brand in the South African truck market (we sold 4 550 units in 2015 and achieved a 17,4 percent market share),” he explained. (It should be noted that this excludes vans and buses and it is specific to the brand; Mercedes-Benz remains the leading company, with three brands.)
“We have now positioned the brand where we want it to be, and have strategies in place to maintain that level as we are still in a growth stage of that strategy. The results we achieved in 2015 are definitely not the end point, but merely part of the journey. I cannot foresee any major hurdles to hinder our progress, except perhaps some major global or local events. The market will, however, dictate where the level will be, if any,” said Uren.
“The Isuzu COO said that the acquisition of Kanu and ACT in the Eastern Cape was a good move. “The production at Kanu/ACT is not totally devoted to Isuzu Trucks, as it also supplies the general market where necessary. Kanu/ACT is doing well and so far is filled to capacity.
“This acquisition has enabled us to get the solution to the market in the most effective manner possible. As we grow in volume, Kanu/ACT grows with us. This has meant great savings for the dealer, who receives a complete vehicle from the factory. It eliminates the need to move the vehicle around for the fitting of the various accessories, thereby eliminating unnecessary expenses and shortening the turnaround time once the sale has been concluded.
“As far as the specialised market is concerned, Isuzu Trucks continues to maintain a high level of activity in the tipper business and dominates in the compactor business as well,” explained Uren.
Also on a positive note, he said Africa held much potential. “For Isuzu, Africa is a huge market opportunity. Around the world Isuzu does well, but Africa needs a lot more work to entrench the product. We have established a good customer base in neighbouring territories and in 2015 we exported more vehicles there than we had done in the last five years.
“Generally, the Isuzu Trucks footprint in Africa is expanding, especially at the assembly facilities in Egypt, Kenya and South Africa. Isuzu Motors Limited Japan sold more than 20 000 new trucks into Africa last year, and it is anticipated that this number will grow considerably in the next five years,” said Uren.
While things look rosy for Isuzu, he noted that the country as a whole faces many challenges. “However, it’s good to see that Pravin Gordhan is shaking the tree and finding solutions that were supposedly Holy Grails before. It’s really good to see that he is trying to fix the South African Post Office, for instance.”
Other things aren’t so easy to fix. “The big issue has been the drought. Unfortunately, we are only in the early stages of the impact of this. There will be more of a bitter pill to swallow on the part of consumers. I think the price of maize and grain has risen by 180 percent in the past 12 months. This is not going to be helping the cause of the poor and unemployed,” he pointed out.
On a more optimistic note, he said that the oil price was unlikely to rise. “It’s a simple case of supply and demand. Russia is in trouble. What have they got to sell? Oil – lots of it. They are sitting on stashes. Emerging markets such as Venezuela and Angola are also desperate to sell their oil. Also, sanctions have been lifted in Iran. There is a lot of oil that they have not been able to sell. This is a perfect storm ...
“The lower oil price could not have come at a better time for South Africans. If we were paying US$ 60 or 70 a barrel, our situation would be dire – given the escalation in all other costs. The lower oil price has provided a buffer, because it’s balanced out the other rising costs. The situation has benefited consumers too; they are desperate for disposable income – so it is good that it costs R100 less to fill up.”
On the subject of costs, Uren predicted that truck prices would rise by ten percent in the first quarter with another five percent increase in the second half of 2016. “Will this reduce demand? Not necessarily. The industry has learnt that old trucks cost you money while new trucks make you money.”
He said that it was, however, difficult to predict what would happen this year. “I think the market will end up about eight percent down this year, but this depends on so many factors; we get caught by a new surprise every day!”
Government will obviously play a huge role. “I am hoping that the finance minister will drive business confidence up. Businesses want certainty and belief. I am hopeful that he will be able to bring the economy back on track. Of course, whether he will get the support to do the right thing is questionable, but one thing is certain: he has to do something significant.”
While Uren conceded that the commercial vehicle market was very much a replacement market, he said that it was important for demand for new trucks to remain. “If demand vanishes, there will be closures and we won’t be able to come back from that.”
He said that there was no need to panic, because South Africans are resilient. “I have faith in South African businesses. We have been through it all before, and we are going through it again; 2016 doesn’t look anywhere as bad as 2009 ... we will plod ahead!”
Let’s hope he’s right.
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