The medium truck market is on a roll

Rising vehicle prices and vehicle operating costs continue to pose the question whether it is advisable to migrate from a light commercial vehicle to a medium commercial vehicle, or to ‘buy down’ into that market sector, which is experiencing an exceptionally strong demand for vans and freight carriers.

According to South Africa’s truck classification system, vehicles with up to 3 500 kilogrammes gross vehicle mass (GVM) are referred to as light commercial vehicles (LCVs). Vehicles between 3 501kg and 8 500kg GVM are classified as medium commercial vehicles (MCVs). Vehicles between 8 501kg and 16 500kg GVM are heavy commercial vehicles (HCVs), and those over 16 500kg GVM are termed extra-heavy commercial vehicles (EHCVs).

There has been a recent upsurge in demand for MCVs. The latest estimates by the National Association of Automobile Manufacturers of South Africa (Naamsa) show that, out of all the CV sectors, the MCV sector posted the biggest rate of sales growth at 22.5% (from 7 557 to 9 257 units) last year, followed by a rate of 20.6% for the HVC and EHVC sectors combined; 17.3% in the car sector; and only 11.6% in the LCV sector.

Furthermore, Naamsa predicts that MCV unit sales will grow 11% to 10 000 MCV units this year. This assumes that the South African economy will grow, in real terms, by between 3% and 3.5% in 2012, and takes expected domestic and international trends into account.

Naamsa’s outlook for 2012 in terms of vehicle sales by sector is summarised in the table below:

Why this positive outlook for mediums?

The 10 000 unit sales expected this year is well below the 12 130 units sold in 2008, before the global financial crisis struck and people put fleet expansion and vehicle replacement on hold.

The older vehicles become, the more expensive the cost to operate them. This is in addition to vehicle and fuel prices rising due to a weak rand, as well as toll fees, vehicle registration and tyre replacement costs. All these factors are causing people to rethink which sector they would like to buy from. That, in a nutshell, is what industry gurus have been saying.

Many people who operate a small business – such as electricians, plumbers and florists – need nothing more than an LCV to get around.

Even Telkom runs a large fleet of bakkies with specialised canopies.

This sector therefore includes pickup trucks (bakkies) and panel vans with a GVM up to 3 500kg only, and may be driven – together with a trailer not exceeding 750kg GVM – with a Code B licence.

If the trailer is more than 750kg GVM, a Code EB driver’s licence must be obtained.

But there comes a time when a medium commercial vehicle is required to carry more weight or a bigger volume (in cubic metres) of goods and/or people. Sometimes both.

An expanding business further complicates whether one should buy another one-tonne bakkie or small van, or go for an MCV with a bigger one- to four-tonne payload that can do the job of two LCVs.

Stricter law enforcement on overloading and carrying labourers on the back of an open bakkie instead of in a crewcab are having people taking a look at options available in the medium sector.

The range of choice in the market is huge. If one wants to determine which MCVs are the most popular, the Naamsa annual and monthly sales figures are the best indicator. Often the leading brand in this sector is the well-known Mercedes-Benz Sprinter, which is available as a panel van or a little freight carrier, with different engine capacities, vehicle lengths (even dual tyres at the back) and panel van heights for the hauling of high-volume loads.

But always running a close battle for supremacy are the Hino 300 series (previously known as the Toyota Dyna Series) and the Isuzu N-Series freight carriers. These vehicles are often used in a multitude of distribution, workshop, municipal and other specialised applications.

In fact, along with the Fuso Canter and the UD-M Series from UD Trucks SA (formerly Nissan Diesel), these Japanese freight carrier brands dominate the entire MCV sector, with the European vans/freight carriers – the Sprinter, the Iveco Daily, VW Crafter, Peugeot Boxer, Fiat Ducato and Citroen Relay – taking a back seat.

European vans improve one’s corporate image – at a price, of course. When competitively priced workhorses are required, Asia is the answer.

Not to be underestimated are the Tata freight carriers from India of which, Naamsa reported, no less than 55 units were sold in December last year. For the most part these are not corporate sales. Rather, they reflect demand from individuals and small businesses such as bakeries.

Last but not least, there is the unknown sales factor represented by other manufacturers from the Asian mainland who do not report sales to Naamsa. Serious, unquantified inroads in the MVC sector are being made by Asian manufacturers FAW, Foton and Hyundai.

Importance

The importance of the African and local MCV market is reflected by South Africa being the first country in which Hino will officially launch its new 300 Series medium truck range, and the first country outside Japan to assemble the products.

Hino previewed the new 300 range at the Johannesburg International Motor Show, and it planned to officially launch vehicles early this year.

Hino South Africa vice president Dr Casper Kruger said the line-up would include wide and narrow cabs, as well as a crew cab derivative for the first time.

There is a strong resemblance to the 500 and 700 Series models in the design of the cab, but the new vehicles are more aerodynamic than the current products.

There is more interior space and improved visibility, while the interior has been restyled with new storage areas as well as instrument panels.

The engines have been improved and are more fuel-efficient derivatives of the Euro 3 Hino power units. The previous 611 model, which had an 81-kilowatt (110-horsepower) power unit, becomes the 614 model and gets the 100kW (140hp) version of the four-litre engine.

The engine produces 392Nm of torque and is fitted to the 714 and 814 derivatives; while the 815 and 915 models have a 110kW (150hp) version of the same engine. The range would further include the introduction of a conventional six-speed automatic transmission in addition to five- and six-speed manual gearboxes.

The Hino 300 series will be the first medium truck on the local market to have standard air bags with seat belt pretensioners for the driver and passenger.

Drawback

The decision whether or not to buy upward into the MCV market is not an easy one, as a number of factors – such as access to townhouse complexes, turning circles, turnaround times, etc. – come into play.

Another major drawback is that by going over the 3 500kg GVM limit, a code C driver’s licence is required. A trailer with GVM of 750kg or less may be attached.

In addition, if the vehicle is used on public roads to transport goods, dangerous goods or passengers for profit (as a professional driver), a professional driving permit (PrDP) must be obtained. This permit is issued in addition to an ordinary driving licence.

A PrDP applies to the following motor vehicle categories:

• A goods vehicle with a GVM exceeding 3 500kg;

• A breakdown vehicle or a bus; and

• A minibus weighing more than 3 500kg, or designed to carry 12 or more people (including the driver).

Export

Meanwhile, the sub-Saharan market – MCVs included – is becoming increasingly important to South African truck manufacturers. UD Trucks SA, in particular, having been on a year-long regional export campaign covering the region and announcing further plans on this soon.

It may find the competition, coming from Kenya, becoming tough – with both Tata and Foton having announced plans to increase their production capacities in sub-Saharan Africa in the face of increasing competition for market share.

For example, Tata Africa Holdings, a subsidiary of Tata International, is planning to start a motor vehicle assembly unit in Kenya to enhance their presence on the east side of the continent and compete with Chinese rivals such as Chery Automobile and Beiqi Foton Motor, General Motors, CMC Motors, DT Dobie, Simba Colt as well as Toyota East Africa.

Currently, Tata Motors operates in Africa through Tata Motors (SA) (Pty), which is a joint venture with Tata Africa Holding (Pty) Ltd.

Tata Motors’ pickups, LCVs and MCVs represent one of the strongest emerging brands in the region. Competition is set to intensify in the East African auto industry following the entry of a leading Chinese vehicle manufacturer in the region.

Beiqi Foton Motor Co. Ltd last year announced it was to invest $14 million (R111.08m) to set up an assembly plant in Kenya, targeting the growing East African market.

The plant, to be located in Mlolongo on the outskirts of Nairobi, will produce some 10 000 units of prime movers, tippers, buses, MCVs, pickups and light commercial trucks annually.

“East Africa is an important region for us and that is why we have decided to invest in an assembly plant, and we intend to sell 5 000 trucks in the region over the next two years,” said Foton East Africa general manager, Calvin Guo.

The assembly plant is expected to start its operations by May this year.

Udo Rypstra