Global Upswing Bodes Well For The Truck Industry

Recovery in commodity prices and a more favourable economic outlook are expected to drive growth in the commercial vehicle segment – in particular the extra-heavy segment, said UD Trucks marketing director Rory Schulz at a recent media briefing.

According to the International Monetary Fund, global upswing in economic activity is strengthening and global growth is projected to rise from 3.6% in 2017 to 3.7% in 2018. This is good news given that during 2017 the South African truck market declined by 2.65% on the previous year’s results to 25 042 new units sold.

Gert Swanepoel, MD of UD Trucks Southern Africa, explained that the lack of growth in the local economy had negatively affected the local truck market.

“With recent political changes in mind, we are hopeful that business confidence will return to more positive levels, which will certainly encourage businesses to invest in their fleets,” said Swanepoel. “Gross fixed capital formation – or the rate at which businesses add fixed assets such as plant, machinery and equipment to their inventories – saw an upturn to 4.3% during the third quarter of 2017, with 37% attributed to the acquisition of new transport equipment. Certainly a good sign for the truck industry.”

Interestingly, the extra-heavy commercial vehicle segment recorded the only increase in sales year on year – of 0.96% – concluding 2017 on 11 967 units. Sales in the heavy commercial vehicle segment were down by 4.76% to 5 290 units, while a 6.37% decline in sales was recorded in the medium commercial vehicle segment, to 7 785 units at the end of 2017. This is according to the latest results released by the National Association of Automobile Manufacturers of South Africa, Associated Motor Holdings and Amalgamated Automobile Distributors.

Schulz has meanwhile cautioned that while the outlook was strengthening, growth remained weak in many countries and inflation was below target in most advanced economies. Looking ahead though Schulz pegged local commercial vehicle growth at 1.5%, stating that UD Trucks was geared to surpass the forecast.

For UD Trucks, developing markets hold great growth promise. Expectations are that light duty trucks (LDT) will grow by 3.5% and medium duty trucks will increase by 5.6%, while the heavy duty truck segment will grow by 5%.

To gain greater traction in the East African markets, UD Trucks has secured a new partner in Kenya to establish a CKD (completely knocked down) assembly facility, which will include the production of UD Trucks units.

According to Swanepoel the truck manufacturer was also anticipating sales from export countries to increase during 2018, forecasting growth across all segments with an estimate of around 990 units. “Locally, we are forecasting a slight 1.5% growth in sales during the year to come, for a total truck market of an estimated 25 418 new units.”

“In 2018 we expect the trend to continue in a positive direction for Africa and sub-Saharan Africa as a whole. Even though the growth is due mostly to the improved commodity prices, the positive trend is also due to some countries focusing on funding projects that can support meaningful growth. Forecasted growth is 4.2% for 2018,” said Schulz.

In anticipation of the projected growth, UD Trucks recently increased capacity at its plant in Rosslyn, and plans to expand its product range.

Moreover, the recent improvement in commodity prices has led to a surge in demand for metals, which the truck manufacturer forecasts will see increased demand for trucks. Ahead of the anticipated robust demand, particularly for heavy duty vehicles such as 6×4 trucks and tractors, the vehicle manufacturer will expand its product range in the near future.

In fact, the company recently invested R30 million in modernising its Rosslyn assembly plant to mirror the company’s Ageo plant in Japan, placing a special focus on improving its real estate, tooling and equipment and jig fixtures and material supply.

Aligned with this initiative to ramp up to 7 500 units per annum from the current 2 500 units was a training initiative of 30 community members, said manufacturing director Aubrey Rambau. “Apart from gearing up for an extended UD Trucks model line-up over the medium term, we are also focusing on enriching the competence of our staff through various skills transfer programmes with Japan, as well as assembler development programmes.”

Last year UD Trucks Southern Africa trained 1 247 dealer and customer staff at its Competence Development Centre in Rosslyn, including 92 diesel mechanic apprentices – a highly sought-after skill in the transport industry.

In response to media questions, Rambau confirmed that UD Trucks recently received a proposal from VE Commercial Vehicles South Africa (VECV SA), a joint venture between the Volvo Group and Eicher Motors, to “produce their product ranges”. A feasibility study to determine the viability of the proposal was under way, he said.

Apart from UD Trucks using its financial solutions offering to vie for greater truck market share, the company is focused on model line-up optimisation to suit customer needs as well as improving their relationships with customers. “Our customer focus has been a success story – in 2016 UD Trucks was ranked seventh according to the customer satisfaction index. After working hard to rectify the situation, the company ranked third at the end of 2017,” said Swanepoel.