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Phil Taylor

Australia’s “two speed” truck market – part 2

May 2016

I detailed that the strong growth that was seen in heavy-duty truck sales over the period from 2002 until 2012 has come to an end. A year-on-year decline in sales at the top end of the market was recorded from 2013 to 2015, and by the end of the first quarter in 2016, light-duty truck sales had overtaken HD sales.

With near record growth recorded at the smaller end of the market in vans and LD trucks, while HD sales continue to decline, many have described current new truck sales as being a “two-speed” marketplace.

I went on to detail that one could no longer blame the poor economic climate that existed in the years immediately following the Global Financial Crisis (GFC), lack of business confidence, the cooling of the resource sector, nor a lack of available finance as reasons for the noticeable slowing of heavy truck sales.

With government forecasts predicting that Australia’s freight task is continuing to grow steadily, the reasons for sliding heavy sales are even more mystifying. Last month, I posed a question that I did not answer, “Why do we continue to witness the on-going decline of heavy-duty truck sales?”

After some investigation, I believe that the GFC does have a long-term role to play. Coupled with Australia’s increasing appetite and reliance on imported goods and the demise of much of our local manufacturing industry, we are starting to see a fundamental shift in the way freight is moved in this country and this, in turn, is changing the demand for the type of trucks used to move that freight. Much in the way we saw the rapid growth of B-double and road train combinations that fuelled the uptake of higher powered prime movers a couple of decades ago.

Unpacking this line of thought a little more, during the GFC and in the year or two immediately following, companies were looking for ways to improve efficiencies. In the freight sector, this meant reducing freight movements and/or the distance an individual piece of freight has to travel.

Instead of landing imported goods, arriving by ship, at a single port and then freighting these goods by road around Australia, companies started offloading freight at multiple ports around the country, cutting down on longer road movements.

Today, containers that are arriving at the major ports are increasingly moved from the wharf to distribution warehouses located on city outskirts by short link rail due to the expansion of intermodal freight interfaces. Once at these distribution hubs, containers are unloaded and the goods delivered directly to customers typically in a small truck.

When a product was manufactured in Australia at a specific location, for example a car built in Melbourne, this was then freighted to the point of sale but now, the new imported car that has replaced the locally made model is likely to be dropped off at the nearest shipping port to the dealer or customer, eliminating the need for the interstate road freight movement.

These subtle changes to freight movements have resulted in financial efficiencies for many freight companies and their customers, but this in turn is changing the basic road freight task in Australia. So while the freight task continues to grow, the interstate movement of goods is static, or possibly in slow decline, explaining the lack of urgency for companies to purchase new line-haul trucks.

Whether this is a short-term trend or a fundamental long-term shift, only time will tell. No doubt the trucking industry as well as government will be watching these trends with great interest, as it will potentially impact on infrastructure planning, future vehicle regulations and tomorrow’s freight logistics operations.

While I do not believe that the days of the interstate truck drivers are numbered, we are perhaps seeing the start of a new phase for road freight transport in Australia. If we are, remember that one of the first indicators was shown using TIC’s T-Mark data.

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