Image

Stark warning to NZ trucking businesses

21 October 2022

Costs for NZ road transport businesses have risen almost four times higher than inflation in the last quarter, according to the latest Grant Thornton Cost Index.

The quarterly index shows that there has been an overall quarterly increase to June 2022 of 6.24% to road transport business costs, compared with a 1.66% increase in the CPI inflation for the same period. Between September 2018 and September 2020, despite an increasing CPI, transport costs managed to stay relatively stable. However, in the last two years, the transporting inflation index is showing unprecedented increases and the gap between that and CPI is growing wider.

The index demonstrates that just passing on inflation level increases isn’t going to be enough to keep some trucking businesses afloat. The industry cost increases are overwhelmingly higher than inflation, driven by fuel increases of 29.64%, followed by an increase in the cost of tyres of 4.10%.

Nobody will be surprised by this, but we are now armed with the information. As a road transport operator, to stay in business, you have got to charge appropriately. Yes, that will affect consumers but the trucking industry cannot afford to carry additional costs itself. Businesses need to understand their own costs, engage with their customers, and pass those costs on. It is important for the economy that trucking companies remain viable to avoid an even more challenged supply chain than currently exists.

Economist Cameron Bagrie warned at the conference that there are about six economic cycles to be aware of. Trucking businesses are now on “cost watch”. We know from a recent industry survey, that one in five transport companies say they are unable to pass any of their costs on, and that is a concern. The good news is that the same survey told us over 40% of industry businesses said the Government’s Road User Charge (RUC) discount of 36% was helping with these cost pressures.

Nick Leggett, Chief Executive, Ia Ara Aotearoa Transporting New Zealand

Source: transporttalk