What lies ahead for the trucking industry
The 2015 edition of the Brisbane Truck Show could mark the turning point for a struggling commercial vehicle industry – with efficiency becoming the new magic word.
It’s hard to ignore the pessimism in Australia’s commercial road transport industry at the moment. Even though heavy vehicle registrations were slightly up in 2014, the New Year has started unusually slow – with many in the industry scaling back on production capacity and capital investment in preparation for a prolonged slump.
In February, the Reserve Bank of Australia (RBA) reacted by dropping the standard interest rate to 2.25 per cent – a record low – in order to give the sluggish Australian economy a much-needed boost and stimulate growth again. The idea was to make it less expensive for businesses to borrow money and enable them to invest again.
But even though the RBA’s move was much in line with what happened in Europe and the US during the last slowdown, the underlying message still left many in the industry uncomfortable. “They made it pretty clear in their statement put out to explain the decision that the reason that they were cutting was because they saw economic growth over the next 12 months to be below trend,” says Greg Jericho, who writes about economics for The Guardian Australia and the ABC.
“In the statement on monetary policy that [the RBA] put out, they were predicting that our economy this year would grow somewhere between 1.75 per cent and 2.25 per cent, which is extraordinarily low. The average rate that we are used to over about the last 25 to 30 years is about three per cent.”
As a result, Australian trucking could be in for a tough 2015-16 season – making the upcoming Brisbane Truck Show in May an important gauge to see just how much of a hit business confidence has really taken during Q1. Although it’s still a while to go until the event, it’s safe to say that the atmosphere in Brisbane will largely depend on whether or not the RBA’s action will increase people’s sense of confidence and make them borrow money, invest and spend again.
But putting an end to the slump is not just a question of waiting and seeing. While the RBA is working hard to make a change on a macro-level, business consultant and Prime Mover columnist Brendan Richards says the responsibility is ultimately with each business. “Let’s not kid ourselves that our future in business is linked entirely to the economy. Yes, there is a level of influence, but it is just one of many. And it’s about the only one we can’t control,” he says. “If you are sitting back, nervous and uncertain as to what the future holds, and looking to the economy to provide clear direction, then perhaps you could also look for inspiration in tarot cards, palm reading or any other equally useful science.”
In line with that, experts demand the focus should be on “re-engineering” Australia’s economy away from resources-related infrastructure development and on becoming more efficient and productive, as a nation. For those in the commercial road transport industry, that could mean investing in more efficient equipment, up-skilling or creative marketing, but it could also imply a complete revision of current business models to see just how well they are placed to service a changing marketplace.
If the IAA Commercial Vehicle Show in Germany last year is anything to go by, efficiency will be the one overarching buzzword in Brisbane. IAA, the world’s largest truck show, demonstrated that transport businesses have to calculate very carefully, right down to the last cent, and in turn demand ever-greater efficiency from a commercial vehicle – a trend that is likely to characterise the Brisbane event too.
Hybrids and alternate fuel vehicles could make a surprise resurgence in that context. After all, both Fuso and Hino now have second-generation hybrids in the Australian market, and both have the ability to make a solid business case based on ROI rather than environmental friendliness alone. Isuzu CNG trucks are much the same and already quite popular with local Governments wanting to be considered ‘green’. The rise of CNG and LNG technology, however, will remain hamstrung until a decent refuelling network is developed – definitely an issue worth discussing in Brisbane, especially against the backdrop of decreasing fuel reserves in Australia.
What could make a more immediate impact on efficiency are low rolling resistance tyres, for example. Fuel consumption is an area where operators can make a significant difference, and tyre companies have been working hard recently to develop more fuel-efficient tyres that can decrease rolling resistance and, in turn, fuel consumption. Also playing into the efficiency trend is the Automatic Manual Transmission (AMT). Previously the domain of OEMs from Europe, there are now sophisticated electronic management systems available from around the globe. In the light-duty category, the Fuso ‘Duonic’ twin clutch AMT is finding strong demand, for example, while Volvo’s iShift system is making headlines in the heavy-duty segment.
The 2014 IAA Commercial Vehicle Show in Germany and the International Truck, Trailer & Equipment Show (ITTES) in Melbourne have also indicated a growing need for next generation telematics technology. Be it direct access to the on-board weighing system to ensure full compliance or remote freight monitoring – both world renowned events have confirmed that rising awareness over the need and importance of transparency could boost demand for tracking technology in 2015 and beyond. The question will be, who can provide a comprehensive, yet easy-to-use system that is able to handle the string of compatibility issues that may arise along the way? Isuzu has already made inroads in that respect with the launch of a highly flexible, captive OEM offering in late 2014, but the aftermarket will certainly make itself heard in Brisbane too.
In bringing the ‘big data’ trend to the road transport world, those open to embracing the telematics trend will also want to learn how to leverage live freight monitoring as a new source of income. With more than 35,000 attendees expected, the Brisbane Truck Show could set the stage for an exciting debate in that context – after all, keeping cash flow strong is key in a slowing economy.
The most urgent question in the component market is whether cost and technology leadership are still compatible, as Michael Hankel, Member of the Board at ZF, pointed out last year in Germany. Hankel said the struggle between quality and quantity is now more palpable than ever before as transport businesses pass on cost pressure to suppliers, who have to either add value or cut costs to remain in business.
According to Hankel, added value can come from volume – i.e. products are supplied to several manufacturers while still allowing them enough scope for differentiation – or proximity to the target market. Think the adaptation of Volvo running gear in UD equipment, the use of Mercedes-Benz engines and transmissions across the Fuso range or the development of the new Iveco Acco in Melbourne. Again, Brisbane will be the yardstick to see which pathway Australian trucking will take.
Judging from the feedback after ITTES, Australia’s trucking industry is still happy to pay for quality if lifecycle cost and ROI are right – so Brisbane is likely to see a fair share of high-tech and value added componentry in May, with weight reduction being a top priority in the axle/ suspension and braking market. More complex electronic support systems are also in the pipeline, as Volvo demonstrated with the FH and FM series. Safety and automation will be a third main focus, especially in the often-overlooked landing leg market, where both Fuwa and Jost plan to leave a mark.
Even though truck sales are slowing down in Australia, there is still confidence in the market that the tide will turn in Q3 or Q4, which could make Brisbane the turning point for an industry that is eagerly anticipating positive change. In that sense, some companies may have more in store than they are happy to admit – think Mercedes-Benz, who have been promising a new Actros model for quite some time now, or Cat, who traditionally save big announcements for the Queensland event too.