Truck sales too low for full SA man­u­fac­ture

Truck sales in 11.3% slump

The Star Early Edition - - BUSINESS NEWS - Roy Cokayne

ISUZU Truck South Africa (ITSA) is pes­simistic about the sus­tain­abil­ity of any gov­ern­ment in­cen­tive pro­gramme to en­cour­age the full-scale man­u­fac­ture of com­mer­cial ve­hi­cles in South Africa.

Craig Uren, a direc­tor and chief op­er­at­ing of­fi­cer of ITSA, said yesterday that the sales vol­umes of cars and light com­mer­cial ve­hi­cles made the busi­ness model of the Au­to­mo­tive Pro­duc­tion and De­vel­op­ment Pro­gramme work.

Economies of scale

How­ever, Uren said there were a mul­ti­tude of truck man­u­fac­tures but with only about 30 000 trucks sold in South Africa, the vol­umes were too low for full lo­cal man­u­fac­tur­ing of com­mer­cial ve­hi­cles to be sus­tain­able.

Uren said Isuzu’s fac­tory in Fu­ji­sawa in Ja­pan built more trucks in one month than were sold in South Africa in a year and ques­tioned how South Africa could achieve economies of scale from such low-vol­ume pro­duc­tion.

He said the pri­or­ity in South Africa was to cre­ate jobs, but dic­tat­ing that busi­nesses needed to do cer­tain things to cre­ate jobs was not sus­tain­able.

Uren stressed the need for down­stream in­vest­ment in ar­eas such as truck body build­ing and re-man­u­fac­tur­ing.

“We have in­vested in body builders to make them sus­tain­able and in­vested in re-man­u­fac­tur­ing to keep those busi­nesses sus­tain­able. We are do­ing things to be a player that cre­ates op­por­tu­nity and em­ploy­ment for peo­ple through what trucks cre­ate,” he said.

Uren added that ITSA had shrunk what it needed to build from com­po­nents out of a box at its as­sem­bly line in Port Elizabeth and had set up a sep­a­rate com­pany, Au­to­mo­tive Chas­sis Tech­nol­ogy (ACT), to shorten or lengthen chas­sis and for any de­riv­a­tives.

He said ACT em­ployed a fur­ther 50 to 60 peo­ple be­cause ITSA’s as­sem­bly line only built one wheel base model but sold three- or four-wheel base truck mod­els.

Uren said ITSA ex­pected the do­mes­tic com­mer­cial ve­hi­cle mar­ket to grow year on year by 1.8per­cent to about 27 800 units this year.

Truck sales in South Africa last year slumped by 11.3 per­cent year on year to 27 011 units.

He said price in­creases in the in­dus­try had av­er­aged be­tween 10 per­cent and 15 per­cent be­tween Novem­ber 2015 and last Novem­ber.

Uren said a price in­crease in the cap­i­tal goods en­vi­ron­ment of 15 per­cent on a truck cost­ing R1mil­lion im­pacted the op­er­a­tor’s abil­ity to fund the as­set, run it cost ef­fec­tively and con­trib­ute pos­i­tively to gross do­mes­tic prod­uct (GDP), but not all th­ese fac­tors had come through into the mar­ket yet.

He stressed that eco­nomics drove the truck mar­ket and ITSA’s fore­cast for the mar­ket this year in­cluded re­duc­ing sales by 500 units by another un­named man­u­fac­turer that it be­lieved would re-re­port in a dif­fer­ent seg­ment.

Uren said if th­ese 500 units were in­cluded in ITSA’s sales fore­cast, it meant a growth of be­tween 2 per­cent and 3 per­cent in the truck mar­ket when GDP was fore­cast to hardly grow by 1per­cent.

“Cap­i­tal goods will fol­low GDP and the busi­ness en­vi­ron­ment. Growth of any­thing be­tween 2 per­cent and 3 per­cent is as re­al­is­tic as we can get for now,” he said.

Uren said ITSA re­mained the num­ber one Ja­panese truck orig­i­nal equip­ment man­u­fac­turer in South Africa last year for the fourth con­sec­u­tive year.

He said ITSA sold 3 952 units last year to end the year with a 14.6 per­cent mar­ket share.

Ex­clud­ing vans and buses, seg­ments that ITSA did not com­pete in, in­creased the com­pany’s mar­ket share to 16.7 per­cent, he said.

PHOTO: SIM­PHIWE MBOKAZI

Isuzu Truck South Africa’s direc­tor and chief op­er­at­ing of­fi­cer, Craig Uren, says the com­pany ex­pects the do­mes­tic com­mer­cial ve­hi­cle mar­ket to grow year on year by 1.8per­cent to about 27800 units this year.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.