Johannesburg - The depreciation in the value of the rand is set to result in double digit increases in the average price of trucks this year.
Craig Uren, the chief executive of Isuzu Trucks South Africa, said yesterday that the average price increases that were published early this year and the further increase from April 1 that had been communicated to franchised dealer networks totalled 10 percent for the first two quarters of this year.
Uren said depending on the currency the rand was compared with, the cost of a truck that was imported in a box and assembled in South Africa had increased by between 25 percent and 30 percent.
But Uren said all the truck distributors and manufacturers had to be competitive and it was not realistic to increase prices by 30 percent, because it would just kill demand.
Uren said historically the rand had recovered by at least 20 percent after it had sharply depreciated, which meant the 10 percent price increase in the first half of this year would have covered the cost of the new business.
However, Uren was pessimistic about the rand strengthening in the short term and expected average truck prices to increase by a further 5 percent in the second half of this year.
Necessary
Uren stressed that these increases were necessary or companies would go out of business.
Isuzu Trucks sold 4 550 trucks last year to achieve a 14.9 percent overall market share and remain the top supplier for the third consecutive year. Total medium, heavy, extra heavy and bus sales in South Africa declined last year by 3 percent to 30 611 units from 31 558 in 2014.
Uren said Isuzu Trucks SA wanted to maintain and grow their market share from 15 percent. He said it was not realistic to forecast sales volumes of 4 500 units for this year if the truck market declined to 28 000 units, because at that level it would probably only achieve sales of 4 000 units.
But Uren said at 4 000 units plus for the year Isuzu Trucks SA would be able to keep its Kempston Road assembly plant in Port Elizabeth running at a daily rate and not have to retrench any people.
However, Uren admitted that if demand dropped below the 4 000 unit level for the year they would experience “problems with layoffs and retrenchments”.
Uren said Isuzu Trucks SA exported more vehicles to South Africa’s neighbouring countries last year than it had done in the past five years. He said they were responsible for exports to Zimbabwe, Zambia, Mozambique and Malawi and sold about 180 trucks into these territories last year compared to between 50 and 60 trucks in a good year previously.
Uren said the economies in these territories were probably a lot worse than South Africa’s economy, but the truck market was growing because a lot of supply chain firms active in these countries had links with South Africa and the business models Isuzu Trucks SA had used successfully for these customers.
“The biggest growth territory is Zimbabwe, because people still need to eat, drink, have bread delivered and need commodities distributed. But they have been doing it in very old trucks that cost a lot of money (to operate).
BUSINESS REPORT