Truck sales too low for full SA manufacture
Truck sales in 11.3% slump
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.