Opportunity knocks for Vic truck industry

The Vice President of the Truck Industry Council, Martin Toomey (pictured), says the creation of a Victorian Government-backed incentive scheme to encourage truck owners and operators to update their trucks could deliver a raft of benefits for end-users, the environment, the community and the wider automotive industry.

Speaking recently with trucksales.com.au, Mr Toomey – who is also the General Manager for Eaton's vehicle division – says such a scheme as outlined in the TIC's National Truck Plan presents a major opportunity for the truck industry, the majority of which is centred in Victoria, to stimulate growth and close the gap in fleet age between Australia and other major developed nations.

According to the TIC's National Truck Fleet Report 2015, approximately 30 per cent of the fleet – or around 175,000 vehicles – were built prior to the introduction of mandatory emissions standards in 1996, with the vast majority of these vehicles primarily operating within cities. The average age of the Australian truck fleet (all classes) is 13.8 years, versus 7.8 years in the UK and 6.7 years in the US.

The TIC's National Truck Plan proposes a reprioritisation of the fuel tax credit rebate scheme to encourage the uptake of new and later-model used trucks, which would lower the average age of trucks on Australian roads and bring with it lower emissions, better fuel economy and higher levels of vehicle safety.While discussions at a Federal level are already underway, with the TIC National Truck Plan recently gaining the support of the Senate Economics References Committee late last year, Mr Toomey says the time is right to push forward with such a scheme within Victoria.

"There's a really good window of opportunity to be in at a state level rather than to wait at a federal level," he says.

Those sentiments are underlined by the recent release of the Victorian Government's Transport Technologies Discussion Paper, which is a part of its $200 million Future Industries fund to promote the growth and future health of the state's economy.

The TIC will be making a submission on the discussion paper, the deadline for which falls on January 22.

"What can Victoria do to differentiate itself or even prevent future disruption of the manufacturing sector?" asks Toomey.

"Clearly one opportunity, given that most of the commercial vehicle industry has gravitated toward Victoria … is to create a modernisation incentive for fleets or to limit where the 'old clunkers' can go."

The TIC National Truck Fleet Report 2015 highlights that one pre-1996 truck emits the same harmful particulate matter as 60 trucks built after the introduction of Euro 4 standards in 2007.

"Regularly you're going to have 40- or even 50-year-old trucks travelling on some of the most sensitive routes through the city – close to the suburbs, the schools, the hospitals," says Toomey.

Mr Toomey says these emissions are in stark contrast to those found along major linehaul routes, where trucks are invariably newer, higher-productivity vehicles.

"That's where the state-of-the art stuff is, but that only makes up 10 to 15 per cent of our fleet," he says.

Mr Toomey admits that any such scheme would have to be financially viable for operators who currently use older, pre-1996 vehicles.

"It would be an impost for someone to go from a 1996 truck to a 2015 model – that's simply not going to happen – so I ran a number of reports through trucksales.com.au [to evaluate the average price difference between comparative truck models of different ages]."

Mr Toomey found that a pre-1996 Kenworth cab over might cost in the vicinity of $35,000 to $40,000, while a post-2003 example might be in the vicinity of $80,000.

"With an incentive scheme, or a higher registration charge for a pre-'96 truck versus a 2003 model, I would probably see a payback in one to two years by upgrading to something more modern.

"It would raise the bar for the whole industry, because the bar is just too low right now. You shouldn't have people, quite honestly, able to enter the industry with say a $15,000 truck – you've got to have a bit more skin in the game."

The general improvement in fuel economy of a newer versus and older vehicle would also pay significant dividends – around $20,000 a year for a vehicle covering just 60,000 kilometres, estimates Toomey – while the scheme would also underpin higher standards across the wider road freight industry.

"Let's say you've got a rig," he says.

"There's no annual inspection, you're good to go as soon as you buy the thing, you're a sole operator and it's just parked up in your street. At what point do you become a part of a culture that looks after governance, safety, and employee well-being?

"It's difficult to capture that person so probably the safest approach is just to ensure that that person has come into the industry with some investment and with some accredited skills, apart from having just a driver's licence and a really old truck.

"No-one's saying that you can't drive that truck, but [under such a scheme] it's going to get harder for you to drive on certain roads, your registration charges are potentially going to go up, and maybe through road user charges and fuel rebates and things at a federal level there will be even more around the corner."

While sales of new heavy-duty trucks have struggled in recent years, Toomey says the second-hand market has a large role to play in the rollout of any such scheme.

"If you ask a large fleet why they aren't modernising faster than they are, even knowing the more modern truck is going to give them some efficiencies, they'll tell you it's because the second-hand vehicle market is dead," he says.

"I don't assume everyone's just going to be able to go from a '96 to a 2015 truck, but if you speed up the cadence of the second-hand market and get the residual value really back into that stock, get the demand in the 2003-plus stock and get some of these older vehicles flicked away, that will at least drive demand.

"That cadence will then continue to drive demand into residual values for modern fleets, and therein you get a kicker for the manufacturing sector. That's where it all starts, because then all of a sudden the likes of Toll, of Scott's, of the Linfoxes and all the other major fleets are excited again about buying new stock – it ticks every box."

Mr Toomey says the knock-on benefit for local truck manufacturer could be huge.

"Let's say this idea gets 40,000 [pre-1996] trucks off the road in the next five years," he says.

"Kenworth's market share is something like 21 per cent, and they're currently building around 2000 trucks a year. If Kenworth gets 21 per cent of 40,000 trucks over the next five years, all of a sudden its build rate has almost doubled. All of sudden it's going to be going from the biggest employer in Bayswater to the biggest employer in Melbourne … and the likes of Eaton, Cummins, Dana, Meritor – we'll all be hiring.

"The Victorian Government has set aside $200 million for the Future Industries Fund and we're not asking for one cent of it, but we're saying don't discount this as an opportunity for Victoria when you're thinking about stimulating the economy."