The number of truck dealerships in South Africa will decrease over the next few years, says BB Motor Group CEO Arnold du Plessis.
The 59-year-old BB Group owns 33 dealerships, ranging from passenger cars to heavy trucks.
Du Plessis says truck dealerships in South Africa currently face a number of challenges.
The first is a declining market.
Du Plessis expects 2018 truck sales to drop from 2017’s numbers of about 25 000 units, faced with a struggling domestic economy and continued policy uncertainty, especially in the mining and agricultural sectors.
He adds that the truck market is being flooded by new entrants, largely from China and India, especially in the shrinking medium-commercial vehicle market, cutting the retail cake into ever smaller pieces.
This oversupply to the market means that truck manufacturers and dealers are starting to cut each others’ throats.
The aftersales market is “also a shrinking market”, says Du Plessis.
With up to 70% of the generated profits at truck dealerships flowing from the aftersales environment, declining new-truck sales will impact profitability.
The rise of the electric truck will, also, eventually, erode already slim profit margins at truck dealerships, as these trucks mean less components and less maintenance, notes Du Plessis.
The light duty truck market will be first segment to experience the major impact of electric vehicle development, he adds.
“Don’t say Africa will not buy electric trucks. They will. It will mean immense savings to operators.”
Du Plessis adds that the infrastructure costs of big, expensive dealerships far outweigh their income scope.
He also notes that the general lack of availability of skilled labour is expected to lead to an ever increasing surge in payroll costs at truck dealerships.
“Tradesmen across all industries are becoming a scarce commodity,” says Du Plessis.
He says the BB Group loses up to 90% of the artisans and technicians it trains, often to jobs in IT-led sectors, which are viewed as more exciting and prestigious.
In short, says Du Plessis, “heavy vehicle dealers are severely under pressure in terms of profit. At the BB Group we only go into profit in the last two days of the month. Margins are very thin.”
The dealers that will survive the next ten years will be those dealers that “can optomise their business” through, for example, building a low-cost dealership, placing different truck franchises on the same showroom floor, and servicing more than one truck brand at a dealership, says Du Plessis.
* Du Plessis spoke at the TruckX conference and exhibition, held this week in Midrand.