Trucks and Taxation

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-By John Boley

It’s a sign of the times. Talk to any auto dealer these days and the conversation quickly turns not to torque and top speeds but taxation, in particular the carbon tax and its dreaded implications. Black Truck Sales, a progressive truck and machinery dealer servicing southern Queensland and northern New South Wales, is no exception. We caught up with Jason Black in his Toowoomba head office soon after the recent federal budget, so almost inevitably the first topic was fiscal.

Black Truck Sales has divisions covering sales, aftersales and used sales of trucks of all sizes, utes and agricultural machinery and although Jason called it a reasonably neutral budget, he feels there must be a retraction in the economy. The implications of the carbon tax are that “we are in the transport business so all our customers are going to be affected, including farmers. Fuel prices will have to rise. Prices will definitely go up because people will have to recoup those extra costs. The distributor of our parts, his costs will rise. So will the manufacturer of our bodies. It will go throughout the whole industry.” Government, Jason says, was “naïve to think that it wouldn’t happen.”

Will there be a lesser impact in the business sector of transport? After all, buying a new truck or tractor is not the same as renewing the family car, which can be seen to some extent as a discretionary spend and put off, delayed a year or more, if necessary. Jason says there is some such effect but it’s not overwhelming. Some customers have a strict replacement programme, others don’t – they will see how business is moving and if the time is not right they will not buy new but hold on to old vehicles. This depends partly on their exposure to increased costs – if, for example, the vehicle is no longer under warranty and repairs might be more expensive than buying new.

“There has been a distinct trend in the last six months toward used vehicles,” says Jason, “because finance for new units is hard to get or they need or want to reduce monthly repayments, so definitely second hand business has picked up. I think people will be very wary of the carbon tax.” It will be July next year before it actually comes into effect. “It will probably be business as usual until then, when customers may hold off until they see just what effect the tax will really have” – assuming it ever does happen, because Jason says there is a suggestion the current opposition might abolish the tax before it actually comes into effect.

“I have talked to lots of people about this and it’s agreed that once a tax is in place, it’s very hard to retract it,” he says. Everyone worries about it, especially the farmers, “but I don’t know how it will directly affect our sales.”

The beneficiaries of any delay are usually the maintenance and particularly the parts departments as owners and operators try to eke out more months or years from their existing fleets. “That’s what we have been seeing for the past two years,” Jason confirms. For a decade before that, sales of new trucks had been rising at something like 10 per cent per year, until the GFC in 2008, after which sales dropped dramatically, back to about 2004 levels. Now nationally they are starting to rise again. “I’m not sure it will be the same ride again, probably a much more gradual increase this time round. The stronger Australian dollar helps from a pricing point of view but not in terms of selling more vehicles. They are cheaper now than they were ten years ago.”

Around 60 per cent of Black Trucks’ business is in trucks and associated parts, 30 per cent agricultural and the remaining ten per cent utes and commercial vehicles. Jason would like the latter category to grow in importance; the company sells Isuzu utes. On the truck side, Black markets Isuzu (Australia’s number one brand) at three of its Queensland outlets – Toowoomba, Roma and Goondiwindi, selling between 130 and 170 units per year, depending on the economic circumstances. Black is also a dealer for Iveco, a range encompassing everything from two to 140 tonnes and sourced partly in Australia and partly internationally, at Toowoomba and Moree, selling around 50 new units per year. The third franchise is the US-built Western Star heavy haulage range, sold out of the Roma and Goondiwindi branches. There is also an associated business called Transmile which deals in general aftermarket parts for trucks.

Black Truck Sales is active in supplying the heavy duty end of the market which is in demand in Queensland, with individually ordered special bodies – tippers, prime movers, triple road trains – on most of the Iveco and Western Star chassis while Isuzu accounts mainly for the 5-22 tonne GVM market.

It’s a dilemma of the industry at present that it’s very difficult to find and retain staff, with the gas and mining sectors taking many of Black Trucks’ qualified staff over the past ten years and rates going through the roof. “Yes, we may have sold more trucks because of the resources boom but our profit is probably reduced because our costs have gone up dramatically too, especially wages, and especially in the regional areas, in order to compete with the gas and mining companies. For the agricultural sector it’s even more difficult – you don’t sell tractors to the mines – so that affects your bottom lines.”

The company has been bringing in a lot of people from overseas as 457s (formally: temporary business (long stay) – standard business sponsorship (subclass 457). “It’s the only way to get qualified fitters,” Jason says. “It’s my opinion they [the government] need to up the [numbers of] 457s dramatically, not just for us but because farmers can’t afford to pay the inflated rates either. They can’t match the money being offered in the mines so we have to have a bigger pool.”

Jason says acceptance within the community is not a problem in the regional areas covered by his dealerships. “We have English, Filipinos, South Africans, Irish, and all of them settle in. It’s all about how you prepare for them coming over – make it as easy as possible and get them into local activities such as clubs wherever possible. Generally speaking, these towns want people like this anyway – unemployment in somewhere like Roma, Chinchilla or Moree is almost zero. If there is anyone unemployed there with a mechanical background there is something wrong.”

The dilemma the company has is how to somehow square the hourly rates paid by gas and mining companies with the fact that other industries cannot afford them. “We have around one hundred staff and could use ten more. We could go out and poach mechanics, but then I would have to pay them ridiculous amounts of money and that doesn’t make sense.” Jason needs good mechanics from overseas at tolerable levels of pay – much higher than they could earn elsewhere but levels at which Jason can still build a sustainable business.

Jason believes that, industry-wide, “if you put 200 fitters out there in our region alone, they would all be snapped up pretty quickly.” Overseas staff living locally help the local economies and the benefits filter down through the entire local community. It is vital, Jason believes, to convince people becoming unemployed in, say, Sydney or Melbourne that they need to be prepared to move to places where there is work. As he says, “There should be relocation benefits for people prepared to move and work in those areas, otherwise regional towns will not grow as they should.”

All a bit depressing? Not entirely. Black Truck’s sales are growing; in the Isuzu utes, “we’ve gone from nothing to 250 sales so far this year and that’s our target for the year. Parts and service is where we are aiming, with newly extended facilities in Roma and soon additional capacity in Goondiwindi, looking after operators who sometimes have bought their vehicles in Brisbane but like to have them looked after locally – it’s a big push to get more of them to buy locally too.”

On the agricultural side, Black Truck offers New Holland, Agco, Croplands, Simplicity and JCB among other brands, at Goondiwindi and Dalby. Jason says cotton is the industry’s best friend at present. “It’s white gold again – everyone has water, cotton prices are the only thing in agriculture that is reasonable and hopefully cotton will have a good run.” With good rain, people may start planting wheat again although prices are still low. If wheat prices rose a bit, the agricultural business would be buoyant again, Jason believes, with interest rates falling and cattle prices good, while confidence is slowly rising.

Jason is close to the business because it’s also his customers’ business; but the company is also a farm business and he himself used to be a farmer (his two brothers and his father are still involved). “So we understand this side of the business… we have to anyway, because if you don’t understand your customer, understand his business, you don’t have a chance of growing with him over time.”

Making Sense of Management

Management is the art, or science, of getting things done through people. Sounds fairly straightforward – except for the fact that people are not robots waiting to do our bidding. People have their own minds, motivations, and goals. So how do managers keep operations – and the people behind them – running as planned?

June 22, 2018, 5:23 PM AEST