Stagnant economy impacts heavy-vehicle sales

A sluggish economy, coupled with a rise in the number of violent attacks on trucks, especially along the N3 highway, are being cited as primary reasons for the dip in the sales of heavy-duty vehicles. Will this trend continue? LIANA SHAW investigates

“The heavy truck and bus market, which takes up about 1 000 units a year, is seeing a terrible downturn,” states Dave van Graan, head of special projects at MAN Automotive.

“Over the past year (ending in June 2019), this sub-segment is down 12,8 percent and, consequently, we are projecting a bus and coach market of below 1 000 units, although it is hoped that some new product entrants from MAN and Volkswagen may stimulate a little up-side in the last quarter of 2019. That the heavy market is down
1,2 percent year-on-year is, in our opinion, directly linked to the general state of the economy.”

Naseera Barnard, marketing manager Ever Star Industries, concurs that things are tough right now. “The past few years have been very trying, with 2019 seeing the worst decline, specifically in construction,” she tells FOCUS.

“Stunted economic growth is the main factor that constrains the commercial vehicle segment. Customers are looking for alternatives to further expand their business and sales. High fuel costs, taxes, strikes and the like are hurting transporters,” Barnard adds.

Leslie Long, senior manager: production planning and marketing at Hino, agrees: “The reasons for the decline in sales in the heavy truck and bus segments are all linked to the economic and political landscape,” he says.

“Everybody expected the markets to settle after the elections, but this does not seem to be the case. Many things have been talked about, but there is no definitive direction from government as to how this will be achieved. This has contributed to continuing uncertainty in business circles.”

Maretha Gerber, head of Mercedes-Benz Trucks at Daimler Trucks and Buses Southern Africa, says the year started off fairly well: “While the first three months of the year proved positive from a business perspective, the period from April to June has been tough. Overall, I expect sales to remain flat for 2019. There are no signs of market growth, and business confidence is still under pressure.

“However, there are definitely some sub-segments with opportunity and positivity for 2019. I further believe that next year will see an upward trend in truck sales, with the trajectory continuing into 2021.”

Additional factors that could be contributing towards the sales slump, according to Van Graan, include the inability of the big five market-share players to deliver, due to production ramp-ups. Customers are choosing to wait for the newly launched products. This is coupled with the fact that government-subsidised contracts are often delayed or postponed.

Long agrees: “The only other factor that can contribute to the slowdown is the timing of replacement cycles from big fleets. We would not like to guess to what extent this is a contributing factor, as only the respective original equipment manufacturers (OEMs) would have a true indication based on their respective customer bases.”

According to the National Association of Automobile Manufacturers of South Africa (Naamsa), another unexpected factor that is having a negative impact is the recent violence and attacks on trucks on main arterial routes.

The Road Freight Association (RFA) estimates that over the past year close to 1 400 trucks across the country have been burnt, damaged or destroyed, with 213 people having lost their lives due to these attacks. Moreover, the loss of life and property is costing the economy between R1.2 and R1.3 billion.

This is alarming in that the road-transport sector is a key contributor to the country’s economy and accounts for over 80 percent of freight share compared to other modes of transport such as shipping and rail.

The N3 highway, which is the main artery linking Gauteng to sub-Saharan Africa’s biggest port, Durban – and ironically, one of  roads that is most critical to the economy of the country – has been particularly hard hit with a wave of violent incidents that shows no sign of abating.

“It is of vital importance that the government and police address and prevent these attacks on trucks and drivers,’’ advises Gert Swanepoel, managing director of UD Trucks Southern Africa. “Trucks form a crucial part of the economy and driver safety is utmost importance,” he says.

In a bid to weather the storm and remain sustainable, OEMs such as Everstar are looking for ways to compete by expanding their product offering and dealer footprint, and by placing more resources into aftersales, while introducing new products into other industry segments.

This is the case at Hino, which is monitoring the market and sales environment on a monthly basis in order to assess and adjust sales and production plans accordingly.

In contrast, MAN appears to be bucking the overall trend by actually growing sales volumes and market share. Van Graan reveals: “We have seen an incredible kick-start to the year, with the best order intake recorded in ten years for MAN trucks. Our heavy truck market share is up 1,1 percent, our extra-heavy truck market share is now 13,6 percent and our share of the bus and coach market has increased to 35,7 percent. If our sales trend continues, we could reach
2 000 truck sales this year with an increase in market share for the fourth year running.”

Going forward, the market is hoping for constructive political and economic reforms, which could mean an improved performance in the second half of the year in terms of new-vehicle sales.