On the level: new and used heavy two-axle trucks
Fri 14 Jul 2017 by Mieke Welvaert in Forecasting

In 2008, new brake requirements meant that the available supply of used commercial vehicles within the medium-heavy weight class1 plummeted, and demand for new vehicles soared.  Fast forward a few years later and new medium-heavy vehicles have maxed out their advantage from the rule change.  Competition from used vehicles has begun to eat away at the market share of new medium-heavy trucks and will continue to do so going forward.

The rule change

The 2008 rule change was part of a broader sweep of braking regulations that were being put in place from 20062 .  However, it wasn’t until this regulation:

“All heavy vehicles used in combination (e.g. a truck towing a trailer), first registered or modified in New Zealand from 1 July 2008 , will have to be fitted with Load Sensing Valves (LSVs) or an Anti-lock Braking System (ABS).“

…when most used imports became illegal and fleet owners really began to make the switch to buying their two-axle heavy trucks new.

This change can be seen clearly in the monthly vehicle registration data for medium-heavy trucks.  In June 2008, the last month before the rule change, used vehicle registrations surged to levels nearly six times higher than usual, before plummeting to about a tenth of the levels seen in the previous year.

Registrations for both new and used medium-heavy trucks dropped off immediately following the rule change, in part because buyer appetite was sated by purchases ahead of the rule change and in part because of the Global Financial Crisis had a dampening effect on overall vehicle demand.  But in the years since, new medium truck sales have dominated the market – a complete switch from the previous trend.

Time to switch back to used?

Times are changing and used vehicles are clawing back their market share.  Over the year to June, sales of new medium-heavy trucks increased only 7.0%, but used truck sales climbed 26% over the same period.  As more used vehicles that meet the braking requirements become available, fewer new vehicles are likely to be bought.

This return to equilibrium has meant that, although we anticipate more sales of new medium-heavy trucks, the extent of further growth will be limited by the increased availability of used vehicles on the market.

What about very heavy trucks?

The rule change also applied to very heavy trucks – all commercial vehicles with a GVM >3,500kg were subjected to the rule change.  But most very heavy trucks were already being imported new.  This preference for new vehicles meant that there was a minimal effect on the composition of new and used vehicles sold at the heavy end of the spectrum.

Interestingly, there was a small spike in new heavy commercial vehicle sales directly before the rule change, suggesting that a proportion of new trucks on the market also did not meet the LSV and ABS requirements.  It is likely that distributors slashed the price of these vehicles in a bid to move stock before it became unsellable.

However, the recovery of used vehicle sales in the very heavy weight class is arguably more marginal than the recovery seen for medium-heavy trucks.  And this is probably due to a phenomenon seen across vehicle types – new vehicles are becoming relatively less expensive over time.  Similarly, for medium-heavy trucks, the ability for used vehicles to take-over more market share hinges on the price of the vehicles relative to their new counterparts.

Disentangling a rule change drop from a GFC-induced slump

Both new and used very heavy vehicles experienced a fall in sales following the 2008 rule change.  But, as the braking regulation coincided with the beginnings of the Global Financial Crisis, it is difficult to disentangle the effects of the rule change on new very heavy truck sales.  To put the effect of the GFC into perspective, new light commercial vehicle sales – most of which weren’t subjected to the rule change – fell 34% over the 2009 year, whereas new very heavy commercial vehicles fell 51% over the same period.

Looking ahead

Looking forward, although we anticipate stronger growth in new medium-heavy trucks, the scope for further increases is limited by demand swinging toward cheaper used vehicles.  However, the narrowing of the relative price difference between new and used vehicles remains an advantage for new vehicle distributors, and we are sceptical that the market share will return to pre-2008 ratios.

1 Two-axle heavy trucks: RUC type 2 >4,500kg GVM

2 For more details.  Please find NZTA’s Q&A webpage here: Land Transport Rule: Heavy-vehicle Brakes 2006 (Rule 32015).

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