Australia’s “two speed” truck market – Part 1

However, the numbers do show short term trends, such as increased vehicle sales leading to the end of a financial year and the pre-buy that can occur when there are significant Australian Design Rule (ADR) changes, such as a move to a more stringent engine exhaust emission standard.

Longer term trends are also evident, such as the sharp downturn in truck sales that occurred as Australia was dragged into the fallout of the Global Financial Crisis in the second half of 2007 and the painfully slow recovery that is taking much longer than many would have thought. In fact, TIC predicts that new truck sales will not return to pre-GFC levels until beyond 2022.

Other long-term trends include the growth and decline of the four individual segments that make up the heavy vehicle market in Australia. In the year 2000 Light-Duty (LD) trucks accounted for 36 per cent of the market, Heavy-Duty (HD) just over 29 per cent, 28 per cent of sales were for Medium-Duty (MD) trucks, while Heavy-Duty Vans (HDVs) made up less than seven per cent of the total market.

In 2006, HD trucks outsold Light trucks in Australia for the first time, becoming that largest segment in our market and this has continued unchallenged for the past ten years. The boom in big truck sales was driven by the efficiencies of moving freight over long distances using B-doubles, two, three and four trailer road trains as well as the high productivity combinations allowed by HML and PBS schemes. No doubt the growing resources boom aided new Heavy truck purchases.

By the end of 2015 the segments looked like this: HD trucks at 32.3 per cent, now only marginally ahead of LD trucks at 32.2 per cent, MD trucks had fallen to 22 per cent, while HDV sales had grown significantly to represent 18 per cent of heavy vehicles sold. By the end of the first quarter of this year, LD truck sales had overtaken HD sales for the first time in ten years, 40 per cent share versus 27 per cent for HD trucks.

For a few years now, Australia’s new truck market has been operating at two very distinct levels, with record, or near record, growth being recorded at the smaller end of the market in Vans and LD Trucks, while the HD truck segment has seen year-on-year falls in sales for over three years now. This trend has many believing that we have a “two speed” market for new heavy vehicle sales.

Since the GFC, coupled with the cooling of the resource sector, many in the road transport industry have been cautious about spending big, typically in excess of quarter of a million dollars apiece, for a new heavy truck. A lack of overall business confidence in the Australian economy and cautious money lenders are other reasons often suggested for transport companies not making large capital outlays on new HD machinery. Some have even suggested that many of the relatively new rigs purchased for the mining sector and now not required, have found their way back into road transport fleets “at the right price”, offsetting the requirement for companies to buy new trucks for their line haul operations.

While these are all very likely reasons, business confidence is now strong and increasing, finance is freely available again and any trucks that were surplus to the mining companies’ needs and of a suitable specification, have surely been sold back into interstate fright operations by now. The Government has not backed off on its freight growth predictions and there is little evidence that the rail sector has picked up any of the freight task from the road transport industry. So why then do we continue to witness the continuing decline of Heavy truck sales? To be continued…

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