In Isuzu, May 2021, Special Report, Scania, Western Star14 MinutesBy Gavin MyersJune 15, 2021

How heavy vehicle OEMs handled the past year’s events and their outlook a year after being hit by Covid-19.

A year has passed since the Covid- 19 pandemic sent the world into lockdown. As quickly as the government responded, so did the trucking industry. With the sector largely considered ‘essential’, truckers who could get loads kept the economy moving during the toughest lockdown periods, while the workshops that kept their engines humming were allowed to do their part – at a socially acceptable distance. You can’t change a tyre, perform a COF inspection, or service a truck from home.

Of course, vehicles were still sold, and things still happened in the background, with non-essential staff working remotely. For everyone, it was something to get used to, exasperated by adapting to new IT systems, reduced efficiency in global supply chains and fewer vehicles, parts and components coming out of factories.

To find out how local vehicle importers and OEMs managed this situation, we contacted the 10 leading names in the industry, speaking with five of them, which is a fair enough representation of what went down and what can be expected in the coming months.

As New Zealand’s only heavy-truck manufacturer, Intertruck is preparing to double production output this year off the back of the pandemic.

Impact on a local scale

According to Penske New Zealand’s Brent Warner, the company noted a slight reduction in business during lockdown but has encountered growth across all its operations since.

Warner says that the biggest challenge encountered in 2020 was effectively managing culture change in working conditions. “At times, 60% of our staff were working remotely,” he says.

As the only heavy-truck manufacturer in New Zealand, Intertruck NZ Group found itself in a favourable position with buyers looking for new vehicles. “The pandemic has brought about an immense growth in new clients with repeat orders from our loyal existing customers,” says managing director Comer Board. “Coronavirus has definitely brought a change to how transport operators view the importance of local manufacturing.”

Board says processing new truck compliance and COFs with increased order volumes were among the challenges for Intertruck during this period. “There is an extreme shortage of COF B certifiers in New Zealand. It is not unusual for a testing station to take three days to process a new vehicle to its full compliance.”

Glenn Stapleton, general manager of Sime Darby Commercial Group, says that overall the largest impact on the group were issues from overseas suppliers caused by either factory shutdowns or supply chain delays. This resulted in lengthened lead times for specific components and raw materials, impacting the supply of vehicles.

Two brands, in particular, enjoyed a record year despite the challenges of 2020 — Isuzu and Scania. Isuzu achieved the title as the leading brand of new trucks sold in New Zealand for the 21st consecutive year, while Scania achieved the No.1 position in market share for heavy trucks (more than 16,000kg GVM), buses and engines in 2020.

Dave Ballantyne, general manager of Isuzu Trucks New Zealand, says: “We have endured the same trials and tribulations as the rest of the industry with regards to various lockdown measures, so the uncertainty associated with the pandemic is something we have had to work through. While I can’t speak for Isuzu Japan itself, I would anticipate variables associated with business planning linked with the pandemic would have presented the biggest challenge.”

Deon Stephens, sales director for Scania New Zealand, says that when it came to Covid-19, the directive from Scania’s global commercial operations office was to become ‘customer- centric’. “We were told to not focus on 2021 but on orders for 2020, on customers and key suppliers — to help the customers through the situation. We had no cancellations last year — the demand was there. That directive followed our core value of customer first, and we delivered on commitments already made.

“In turn, we also increased our stock and parts holdings. We could foresee there would be interruptions. The timeframe to get trucks here from Europe can be long, so we certainly focussed on that.”

Penske New Zealand is bullish about opportunities through 2021, while Scania New Zealand and Isuzu Trucks New Zealand both made a record year of 2020.

Support from the principals

Everyone we spoke to commented on how their organisations were supported from a wider OEM perspective. By and large, the feedback was that OEM support was extensive and resulted in changes to the way business has been done.

“Penske implemented strategies to support our customers’ immediate needs and to ensure we have a strong foundation and focus on future growth,” comments Warner. “These included several new daily, weekly and monthly business KPI measures focussed on providing us clear guidance on current and trending market activity. This, combined with enhanced OEM partner engagement, has seen Penske well- positioned to continue to support our customers and secure growth opportunities.”

Ballantyne says that good leadership, a strong relationship with dealer partners and consistent communication with Japan enabled Isuzu Trucks New Zealand to remain focussed on the job at hand.

“The key measure has been an increase in the level of communication across the organisation. This, in turn, helps reassure our dealers and customers that we’re doing what we can to ensure their business is impacted as little as possible. The dealers are at the forefront of our operation and are a huge support for our brand and customers.

“I must say that Isuzu Japan has been very good at supporting us through the challenges that 2020 has presented,” notes Ballantyne.

Similarly, Stephens says that communication within the Scania organisation significantly increased as challenges were discussed and worked through.

“We put in place ‘crisis response’ scenarios should Covid-19 spread throughout New Zealand, with action plans to ensure our customers are fully supported in keeping their businesses mobilised.”

Stephens notes that a specific challenge from the European perspective has been absenteeism within all European factories, all affected by either the staff or their family members getting Covid-19 and isolating.

Supply chain problems

While working conditions globally had to change during the past year, with many countries still not fully back to pre-Covid conditions, the movement of raw materials, goods and components has also been widely impacted. Subsequently, the local industry has suffered an impact on product availability.

“Covid has impacted key suppliers visiting New Zealand,” notes Stapleton. “We are doing a good job of mitigating supply change impacts through making early changes to order volumes and frequencies. Our order volumes have increased significantly since November 2020, and this has continued into 2021.”

Shipping delays and delays at the ports are important to mention, he adds. “Our shipping partners have done an excellent job at sheltering us from the total effect and accelerating the processing of our orders through the ports. We have adjusted the frequency and volumes of orders to increase stock on hand. We are also doing that on capital items, Palfinger and trucks, to ensure that even with delays, we have shipments coming in regularly and we don’t depend on one ship or delivery.”

Stephenson concurs, stating the global shortage of raw material has affected some vehicle specification availability and delivery timeframes. Global shipping timelines have also been unpredictable, which has greatly affected planning with local body builders and delivery times to customers.

“I believe there will be further challenges from Covid- 19 for some time, mainly around getting raw materials such as tyres and electronic components.

“These things affect specification. The factory monitors what parts are currently being supplied, which affects the final build. If there’s a spec that we can’t get, the build either has to be delayed, or the spec changed. That’ll be so for some time,” he says.

Penske, too, has experienced some disruption in international supply chains. “However, our strategy of immediately increasing stock holdings of parts, trucks and engines as the pandemic evolved enabled us to continue with business as usual while providing our customers with the confidence and assurance that Penske can support their needs,” says Warner.

Adds Board: “Late last year, we anticipated a change in shipping patterns, understanding the extreme difficulties in this sector, and prepared ourselves to hold more inventory of materials to hold us until this settles to some normality.”

For Sime Darby Commercial Group (Hino, Volvo, Mack, UD), order volumes have increased since November 2020.

What might 2021 hold?

For Intertruck, keeping the flow of products rolling through the company’s Mount Maunganui assembly plant has meant increasing staff levels by a third in preparation to double production output by mid-year. “It would be fair to say that we have gained the confidence of many operators by listening to what they need, building trucks designed for their businesses and setting up a countrywide dealer network to support our brand,” Board says.

Stephenson says that Scania New Zealand is still experiencing significant growth in vehicle sales and is implementing and cementing its service network strategy.

“Market demand is still buoyant, and we expect strong volumes of vehicle deliveries throughout 2021,” he says.

Warner is similarly bullish about the opportunities 2021 may bring. “We are looking forward to completing several significant growth opportunities.”

Stapleton and Ballantyne add a cautionary note, however. Stapleton says that Sime Darby expects order volumes to recover, but this is tempered by a slow return to normal stocking levels.

“The business has adapted well to the changing environment. Our suppliers are extremely responsive to Sime Darby as a major trading partner, and we continue to work closely with them to mitigate significant issues. We are seeing business improve and are confident this will continue through 2021.”

Ballantyne warns one of the biggest challenges will be planning for the unknown; “what Covid would involve, whether it was going to be short- to medium-term impact, planning for every eventuality,” he says.

“There are still a lot of variables at play, especially with regards to virus- related considerations, and we’re working closely with Isuzu Japan to manage our production and stock requirements as effectively as possible.”