A wide choice but evaluate the risks

OK - here we go into 2006. For starters, I hope all our readers enjoyed TruckWatch 2006, our first edition of the year posted in January. TruckWatch is our annual compendium of vehicles specifications which, in its 10th year of publication, continues to receive high accolades from the market as a value added product. Truckwatch has, we are told, become a more important publication that it was 10 years ago for the simple reason that the proliferation of truck models on the market has become quite mind-boggling. And it is going to get even more so as even more entrants come in. At a recent Nissan Diesel media briefing, it was pointed out that, at last count, there were 24 Naamsa and seven non-Naamsa members selling trucks into this market. That probably gives the customer the widest choice of vehicles he has ever had in this country. But, as Frans Cloete, executive vice president of operations at Nissan Diesel SA pointed out at the briefing, with that choice comes risk and operators would be well advised to evaluate the short and long term risks associated with their truck purchases this year. It's pretty widely accepted that 2006 is going to see yet another record year for truck sales but when you're buying, remember that life-time costs are what one should be looking at. And while on the subject of buying trucks, look carefully at your financing methods. One need only look at the used truck market to get a handle on how circumstances have changed over the years. The residual values you had built in five years ago are no longer relevant so how relevant is the financing method you used then. Ah, don't you just love this industry. There is nothing constant.

That's enough about new trucks. Let's now kick off the year with a look at the state of some of the existing trucks operating on our roads. If you want to feel sick to the stomach, then turn to page 14 to read and see what we found when - under the banner of BrakeWatch, a new partnership initiative between FleetWatch, Wabco, Acsa-Mag and Arrive Alive which also involves the Metro Police - we tested some of the rigs operating in and around Johannesburg. Have a look and tell us what you think. And hey - have a great year of great trucking!

Truck Operating Benchmarks - 2006
Assumptions & Format Revised

Trucking and its related activities are dynamic and ever changing. 2005 was another outstanding year for the South African economy that produced record sales of new trucks and cars and a greater demand for road freight transport services. However, it was not an easy year for truck operators and distribution intensive industries and companies.

A number of events and imminent developments have compelled FleetWatch to make several changes to the format and content of the popular and now well-established truck operating benchmarks. The most notable of these changes and developments include:

• For the past two and half years, the price of new vehicles in particular and allied equipment in general has remained stable and in some instances, static. While owners and operators have welcomed this, one of the side effects to emerge is the significant softening of residual values and consequently, used truck values. The sale of new vehicles is fiercely competitive and very much a buyer's market. Banks are reluctant to accept more than a modest level of residual value other than in exceptional cases. This holds the potential for higher periodic repayments.

• The last two years has seen the introduction of several new makes and models across all market segments. The emerging lower-priced vehicles are capturing notable market shares. However, their respective track records need a little longer before they can be objectively assessed.

• The introductions of international reporting standards (IRS) are likely to impact on freight rates when large and longer-term contracts/tenders are involved. Vehicle and equipment depreciation is now based on estimates of useful life and ultimate residual value, both of which are to be reassessed at least annually and modified to accommodate any changes that may have taken place. Gone are the days when vehicles can be written off over say five years when they are kept in service for 10 or more years.

• Due to the rapid rise in the hourly cost of maintenance labour rates, we have incorporated a more detail approach to monitoring this and the movement in replacement parts prices.

• The February 2006 benchmarks include the latest changes to vehicle and equipment prices, maintenance and tyre costs and the expected increase in driver wages. The allowance for unforseen expenses has been increased to R10 000 a year.

It is important to note that the changes to the format and content made the exclusion of tip trucks and trailer-tipper benchmarks unavoidable. These will be covered later in the year in a separate set of benchmarks for the most popular tipping operations. Due to the changes mentioned above, the 2006 benchmarks are not directly comparable with estimates published before January 2006. If any aspect of the 2006 benchmarks and the assumptions on which they stand are not clear or fully understood, please contact Max Braun on maxbraun@iafrica.com for clarification.

We are also pleased to inform our readers that the FleetWatch Truck Operating Benchmarks have been adopted by many companies as the official benchmarks on which to base their operations. The feedback we have received from both small and large companies in terms of the accuracy of our figures is most encouraging and tells us that we are adding value out there. We are also pleased to tell you that Digicore is remaining as our partner in this venture as we head off into the future. It is a partnership we value. I would also like to publically thank Max Braun for the enormous effort he puts into this work. His attention to detail is most admirable and is valued by all. 

Patrick O'Leary
Managing Editor