Banks put brakes on trucks and buses
WHILE THE PASSENGER – and especially the light commercial vehicle market – continues its downward spiral, South Africa’s truck and bus market held up remarkably well in 2008, thanks to the continued shift from rail to road, Government’s infrastructure and transport projects and a healthy albeit slowing construction sector.
A total of 34 664 trucks were sold in 2008 and although that figure is down 2 403 units from 2007’s record year, it still represents the second highest annual volume ever recorded by the market, figures from the National Association of Automobile Manufacturers of South Africa (Naamsa) show.
However, as with cars, conditions worsened considerably towards year-end 2008. The first decline only registered in October but sales of heavy trucks and buses fell a dismal 35% in January compared to last year. With the fundamentals in SA appearing strong, why then the sharp declines and the somewhat depressed outlook for 2009? Thomas Hemmerich, chief executive of MAN Truck & Bus South Africa, blames the banks. “In southern Africa and the rest of the continent there isn’t a demand problem – quite the contrary. It’s just that banks have tightened their lending criteria – for example, requiring operators to have a minimum turnover of R100m – to such an extent it’s forcing the smaller guys out of the market. And smaller operators make up the vast majority of our clients.”
That flies in the face of Government’s objective of opening up the industry to smaller operators. Mercedes-Benz SA’s commercial vehicle division launched just such a programme in 2007, in partnership with the National Empowerment Fund and the Industrial Development Corporation. The R330m first round of funding has already been disbursed and by all accounts the project has been a success for owner-drivers and small operators.
MAN says credit approvals have all but reversed: from 20% of applications being declined it’s now closer to 70% to 80%. Nissan Diesel, SA’s number one medium truck brand, reported in its annual forecast a similar drop in credit approvals.
By contrast to the tough times for the small guys, Hemmerich says major operators he’s talked to say they’ve never had it this good: they can simply wait to cherry pick contracts from smaller companies that are struggling. If that trend continues it could see the SA market being dominated by a handful of large companies.
Says Hemmerich: “It’s ironic, given that our financial management systems have always been much more stringent and conservative than in Europe. Here we place the factory order only once finance has been secured. Elsewhere, orders are placed even before a sale is made and buybacks flooding the used marker are placing severe strain on manufacturers in Europe.”
Hemmerich, who joined MAN SA in June last year from his position as director for the German market, remains optimistic about the African market (MAN SA in Johannesburg is responsible for the entire continent). “We’re looking overall at a more or less flat market on the continent. I have sympathy for my successor in Germany. He has to deal with a 30% drop in volumes and new and used stock piling up in the thousands. In Africa we actually have a shortage of used vehicles.”