The price of a new truck in South Africa will probably increase by around 10% in the first half of this year, estimates Isuzu Truck South Africa (ITSA) director and COO Craig Uren, with another 5% possible in the second half of 2016.
These general price increases are the result of the rand, which has weakened around 30% against the globe’s major currencies in recent months, he says.
Trucks, even if assembled locally, have very little local content, and are largely imported.
“If prices stay where they are now, the industry will have a problem. However, we can kill demand if we move the price up by 30%. It is difficult to get 30% back from the consumer,” notes Uren.
Apart from the weak rand, South Africa’s trucking industry also this year faces the cumulative impact of low economic growth, the uncertainty and upheaval elections bring, low to no investment from business and diminished government spending
China’s economy is also floundering, interest rates are increasing, while the impact of the severe drought the country is experiencing will only be felt later this year, says Uren.
The one saving grace has been the collapse of the oil price, he adds.
“South African truck demand has been helped by the lower cost of fuel. Fuel is a transport operator’s biggest operating cost. The attrition in the market would have been much worse than is the case now if we had higher oil prices,” says Uren.
“This is almost a windfall considering the increases everywhere else. We would like fuel prices to remain where they are, so we can have some equilibrium in our industry.”
Sales in the South African truck market dropped 3%, to 30 611 units, in 2015, down from the 31 558 units recorded in 2014.
Uren expects sales to decline by another 8% in 2016, to around 28 000 units.
However, he expects growth of between 3% and 4% in 2017, should Treasury manage to restore confidence to the market.
ITSA has grown its market share from 8.4% in 2005, to 14.9% in 2015 – or 4 550 units sold.
Uren is positive that ITSA will hang on to its slice of the pie in a shrinking market, which should see sales crimp to around 4 000 units. Anything below that number could lead to retrenchments at its local assembly plant, he warns.