After getting regular emails from auction houses around Australia in the last few years, it would appear that the Australian trucking industry is going through a period of structural change.
The privations of crises like those around Covid, plus a generational change as operations which started in the 60s and 70s see their founders retiring and the next generation, in some cases, not taking up the baton. All of these factors seem to be feeding into this cultural structural change.
20 years ago, the company I was working for surveyed fleet sizes from our database. We discovered there were a number of sweet spots for the trucking industry, in terms of truck numbers. There was a sweet spot around five trucks, another around 20, on more around 50 and another over 100.
At five trucks, it is possible possible to run a sustainable fleet with the owner of the fleet, driving one of those trucks. Bigger than that, the owner has to come off the road and administer the business full-time, so the best thing to do was to grow to around 20, where there was enough work to justify a management team at base running 20 trucks.
Growing meant even more support in terms of both maintenance, management and compliance made it worthwhile to try and grow to around 50 trucks where all of those cost could be spread out over a larger number of trucks. A similar process would occur between 50 and 100.
Those numbers have probably changed and grown as the cost of administration, compliance and automation have grown. However, looking at the auctions, which have been occurring for the last five years, it would appear that, those mid companies are being squeezed from both above and below. Unable to compete with the big boys on price and unable to match the cost base of the smaller operators.
Of course, there is another factor, Covid’s chaos and confusion disrupted and virtually stopped the supply chain of new equipment. This drove up the price of used equipment as fleets looked to re-equip with not access to brand-new equipment.
All of a sudden these medium fleets would realise that their overall asset value was much higher than before. Looking at the balance sheet it became a lot more attractive to simply sell all the vehicles in the fleet and realise the value of those assets.
What are the expectations of the structural changes which have taken place in the last few years? It seems to be that the big fleets are getting bigger, but the smaller fleets are not growing into that space between the genuinely big fleets and the much smaller fleets.
Those mid-size fleets are the ones who seem to be disappearing and this makes life easier for the much larger fleets to grow. In the past, the very big flats would contract many of those mid size fleets to do specific tasks within their overall national task, but now as they disappear. There will be a tendency for the bigger fleets to grow and bring that work back into their own sphere.