Long Term Structural Change?

The trucking industry and those who supply it may have to ask the question, whether this is long term structural change? There is something happening, and we seem to think it’s only temporary, but it may not be the case.

I have been a keen watcher of truck sales figures over the years and there is definitely something going on, which is a little different. Variations are being explained away as short term fluctuations or corrections, but they are hanging around for a long time.

In years gone by, the trends in trucks sales were very predictable. The heavy duty sector drove the whole thing, pushing ahead and forming an accurate indicator of how the industry was going. If rates were getting squeezed and things were a bit tight, the truck buying public took the right foot off the pedal and sales slowed, for a while.

When things were going well, there was no stopping heavy duty truck sales. Just ask Kenworth, the company rode a wave of ever increasing demand for its product for a great deal of its history. Economic growth and rising truck sales went hand in hand, more goods needed moving, so truckies went out and bought newer, and bigger, trucks.

At the same time, light duty trucks were going pretty well. They again were a good indicator of economic health, especially in the building and retail sector. Medium duty trucks seemed to be stuck at one level, barely changing year-on-year.

Then 2008-2009 happened. It was quite a shock for a truck industry which had seen year on year growth for so much of the previous thirty years. The global recession didn’t cripple our economy like it did those in Europe and North America, but it did make lenders more wary and companies more careful about exposure to debt.

The slowdown was seen as a blip, truck sales would fall back for a period, and then, when everyone had got it out of their system, it would be business as usual. It’s been seven years since then and the truck industry is still comparing truck sales to 2008 levels and looking longingly at the days when the numbers kept rolling in.

Economic activity has returned to pre-GFC levels and is going quite well in many sectors. However, heavy duty has not started charging ahead. Instead, we are having a revival of the medium duty market and light duty trucks are selling well. In contrast, there has been a dip in van sales, one of the sectors which continued to perform strongly through the dip in sales in the rest of the market.

This is not just a blip and it will return to normal, the game has changed. The nature of freight transport is changing. Yes, there is a need for B-doubles to pound the highways at night between the capital cities, but the operators of these tasks seem to be getting smarter and minimising dead kilometres, improving productivity.

Control systems are also getting smarter, the right goods are in the right place at the right time more often. There is less need to get item A, from B to C between 5 pm tonight and 6 am tomorrow morning.

The increase in medium duty and strength of the light duty truck market can be put down to the increase in home delivery, associated with online shopping. There is a bigger need to get items distributed around urban areas efficiently and smaller trucks, with vans, are filling the gap.

Remember the good old days? Well, they are never coming back. We have to live in the modern era and be a light footed flexible industry ready to handle the changes in requirements the new order throws up.

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Author: Tim Giles

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