The third quarter of 2019 has seen declines in key market sectors continue, although there were a few outliers that bucked the trend of declining new asset sales. The quarter, in short, can be found below:
Quarter three was a particularly busy period for Valuations with one of the highest recorded results over the last 2 years. A review of the business shows that valuations for lending purposes continue to dominate.
Categories of Assets valued continue to be dominated by heavy transport, including mostly trucks and trailers, accounting for just over a third of all valuations. Followed by Plant and Equipment, Earthmoving and Mining and construction.
Just outside the quarter in October we held our annual Slattery Asset Advisory Valuation Conference in the Hunter Valley. We heard from three keynote speakers. Cathryn Lee Associate Director Macroeconomic Deloitte, Romesh Rodrigo Senior Manager Product Planning and Engineering at Daimler Mercedes/FUSO Truck and Bus and Gayle Dickerson Partner, Restructuring Services KPMG Australia. Our valuation team also delivered in-depth market insights into the automotive, mining and earthmoving sectors. The annual conference was another success with attendees taking with them a wide scope of valuable and educational insights across a range of asset classes. The highlights for the attendees across the two days were the sessions on Economic Outlook, Commercial Vehicle Technology for Today and Tomorrow, Valuation Insights and the Westrac Tour.
To view the full presentations from the conference please contact email@example.com.
Across the heavy-duty truck sector, the total of new truck sales sold for the quarter reached a total of 9,507. Volvo is the flavour of the quarter in the heavy-duty trucks sector with a total of 180 trucks sold in the month of August followed by an additional 198 sold in September bringing their year to date total to 1,656. This leaves them just trailing behind the Kenworth brand which is sitting at a total of 1,688 year to date. Across the market, we are seeing a better market acceptance of European cab-over trucks, particularly automatics, as the demographics of truck drivers in Australia shift with the Volvo being the most popular option. The popularity of the Volvo prime movers is because the trucks are being manufactured locally and are built for Australian conditions as opposed to the other European brands such as Mercedes Benz and Scania. Volvo trucks also have a stronger resale value than other European Brands due to the larger brand equity they have built-in Australia over their time here. The popularity of cab-over trucks (as opposed to bonneted trucks) is to comply with regulations on truck lengths thereby allowing operators to use longer trailers, which carry more cargo and are therefore more commercially profitable.
Driver shortages are being reported all over the country with Victoria the worst affected, which is facing a shortage of over 3,000 drivers. Owing to an increase in demand for freight. Some of the challenges the industry faces in recruiting truck drivers include:
Medium duty and light-duty sectors have remained consistent during the third quarter of 2019. In August we saw a total of 644 new medium-duty trucks sold and a minimal decrease in September with a total of 622 new trucks sold. The light-duty trucks performed slightly better with 1,029 new trucks sold in August and 986 trucks sold in September. Light-duty truck sales have trailed behind those of 2018 by 9.4%, this amounts to 789 fewer trucks in this category sold thus far in 2019 with the year to date total sitting at 8,567. Van sales throughout the third quarter fell 10.5% in August, with current sales up 2.7% over the 2018 results. Japanese brands have remained strong in the medium and light-duty truck sector throughout the third quarter, with Isuzu leading the market in both sectors with total year to date sales in the medium-duty category reaching 2,234 and 3,186 in the light-duty category.
The secondary truck market has followed the same pattern as new truck sales with another slow quarter for 2019, particularly for the sale of prime movers and light commercial vehicles. In Victoria, they have reported that trucks in excess of 10 years old are becoming more difficult to finance and have suffered the greatest decline. However, despite the slowing in the market, buyers at auctions are still willing to compete for good quality transport assets which can be seen in the sale results of a 2016 UD Condor 14 Pallet Curtainsider that sold for $107,700 in September during our Victorian auction and achieved 97% of retail value. This has been related to the reduction in initial capital investment for the buyer in comparison to purchasing this same truck from a dealer.
In New South Wales there was a slow start to the quarter with it bouncing back slightly in August and September. Highlighting this trend was the sale of a 2016 Mitsubishi Canter tabletop achieved a high bid of $22k, when it only received a high bid of $17,500 the previous month. This is predominately due to better stock offered, a larger and more enthusiastic crowd at the August auction.
Support for tipper truck and dogs continues to be almost non-existent unless the assets are very late model. This is highlighted by 4 Kenworth tipper trucks that ranged from 7 to 12 years of age that were offered in the July Truck & Machinery auction. These assets would have been highly sought after only 9 months previous when the Sydney tunnel jobs were underway and there was a huge demand to move dirt. Projects such as Westconnex are technically only 51% complete but there is a current lull in the program where bulk haulage is not needed with the tunnel sections being completed. However, these 4 trucks all failed to attract a single bid at this auction. One anomaly of a result was a 2016 Iveco Stralis 500 6×4 tipper that made 100% of retail at the September auction. Tipper trucks have been in freefall throughout the year, and Iveco is not one of the top-end brands in the market. However, the truck did present well and is a relatively late model. With limited enquiries on this truck leading up to the auction, and on the day, there were only two bidders who engaged in a bidding war. Both parties had come to buy the truck and didn’t want to leave the auction without it.
Trailer sales have dropped off in the secondary market through the third quarter in Victoria. While the drop was not significant, it is expected that the market will return to what was achieved during the second quarter of 2019 as we lead up to Christmas. The highlight this quarter from our Melbourne auction saw a 2017 Vawdrey High Cube B Double Set sell for $114,200 during the quarter reaching 90% of retail value.
In Queensland, the trailer market has continued to decline with the notable exception of side tippers. This relates to the shortage of good quality stock on the market and these trailers are predominately used in civil construction. The Western Australian market has seen similar results as the Queensland market due to the lack of contracts available within the state.
|2007 Volvo FH16||1,362,658||$27,750||108%||WA|
|2016 Iveco Stralis 500 EEV 6x4 Tipper||129,170||$105,000||100%||NSW|
|2018 Kenworth K200 6x4 Prime Mover||118,618||$277,000||100%||NSW|
|2016 Western Star 4964 FXT Prime Mover||499,955||$118,000||100%||QLD|
|2016 UD Condor PDC8E 6x2 14 Pallet Curtainsider||96,619||$107,700||97%||VIC|
|2018 CBB CBBDT-4 Quad Dog Tipper||$66,300||95%||VIC|
|2019 DAF XF105 Prime Mover||53,000||$157,500||95%||QLD|
|2010 Isuzu NPS300||122,327||$45,000||93%||WA|
|2015 Mercedes Benz Actros 2644 6x4 Tipper||56,872||$142,500||90%||VIC|
|2014 Isuzu FYH 2000 9.5 Tilt Slide||304,144||$167,000||90%||VIC|
|2017 Vawdrey CBS High Cube Curtainsider A Trailer||$54,400||90%||VIC|
|2017 Vawdrey CBS High Cube Curtainsider B Trailer||$59,800||90%||VIC|
|2012 Kenworth T659 Prime Mover||488,463||$120,000||90%||QLD|
|2011 Rhino Deck Widening Quad Axle Low Loader||$95,000||90%||QLD|
|2013 Kennedy Tri-Axle A &B Side Tipper Set||$132,000||90%||QLD|
The earthmoving and mining market have continued to slow in the third quarter, with industry leaders Caterpillar Inc reporting a 6% decrease in revenue across their business. The Caterpillar construction industries for Asia Pacific have reported a 29% decline in sales in the third quarter in comparison to the corresponding period in 2018 which is related to continued competitive pressures for operators to reduce their margins. The resources industries in Asia Pacific have reported that there has been a 6% decline in sales, while the energy and transportation sector has an increase of 10% in the region. The construction Industries in the Asia pacific also fell 7% compared to 2018. Sales in Asia/Pacific were lower across most of the region primarily due to lower demand in China, including unfavourable changes in dealer inventories, amid continued competitive pressures. Even with the drop from last years a profit of $940 million was still delivered.
The market for earthmoving equipment has continued to soften across Queensland, Western Australia and New South Wales during the third quarter of 2019. Whereas the Victorian market has continued to attract interest from buyers for good quality secondary equipment. This can be seen with sale of a 2018 Kobelco SK85MSR excavator selling for $75,000 and achieving 88% of retail. The interest in the Victorian market is due to the number of infrastructure projects that are currently underway including the Metro tunnel which has been designed to free up space in the city loop, the level crossing removal project and the Westgate tunnel project.
In New South Wales while we have seen a continued slowing in demand for earthmoving assets, we are still achieving reasonable auction prices due to the current infrastructure projects that are still in play. This can be seen in the sale of a 2017 Kobelco SK135SR excavator which achieved 95% of retail value and a 2013 Caterpillar 12M Grader in good condition that sold for $200,000 at auction.
Queensland has continued to see a decline in the secondary earthmoving sector, which has seen several civil contractors selling surplus equipment or closing operations and selling fleets of equipment due to the lack of infrastructure projects within the state. It has also been noted that finance for secondhand earthmoving assets has become harder to obtain.
We expect demand in both the new and secondary markets for machinery to increase in coming years as local, state and federal governments seek to increase infrastructure spend to stimulate the economy. There has been an enormous amount of commentary on infrastructure spend in the media and whilst infrastructure spend has long lead times, smaller machinery will come in demand on smaller projects and that demand will increase in to larger machinery as the larger infrastructure projects come online. The below graph, which only includes projects worth greater than $1bn, shows projected infrastructure spend will hit approximately $21bn in 2021 and $22bn in 2022.
|2007 Caterpillar PF-300C Multi Tyred Roller||7,044 Hours||$50,000||110%||QLD|
|2013 Merlo Panoramic P34-7 Telehandler||3,932 Hours||$32,000||100%||NSW|
|2013 Caterpillar 336DL Hydraulic Excavator||7,044 Hours||$135,000||100%||QLD|
|2012 Caterpillar 14M Motor Grader||5,413 Hours||$305,000||100%||QLD|
|2017 Kobelco SK135SR Excavator||1,374 Hours||$122,500||95%||NSW|
|2010 Manitou MRT 1840 Telehandler||1218 Hours||$76,000||94%||NSW|
|2017 John Deere 670G Motor Grader||1,021 Hours||$212,500||90%||QLD|
|2018 Kobelco SK85MSR Steel Tracked Excavator||1,251 Hours||$75,000||88%||VIC|
The agricultural machinery market has continued to struggle due to drought conditions in the Eastern states. Tractor sales in September have shown some resilience to these current market conditions with sales rising 3.3% against sales results from last September, but overall sales year to date are trailing 11% behind. New South Wales has seen the first rise in the market, which has not been seen in some time, with a mix of 0-40hp machines pushing the sales up 6.2% over the last quarter. However larger machines above 200hp units continue to struggle within the New South Wales market and are now trailing 20% behind last year’s sales results. Queensland has taken the largest dip in the market this quarter with a 5% decrease in September, causing the total sales for the year to now trail 7% behind last year’s results.
Victoria has reported the strongest results for the quarter with September sales up 23% on the same month last year. The Victorian markets quarterly results are still trailing 5% behind the sale results for 2018. Victoria has however accounted for over 30% of industry sales and is playing a pivotal role in supporting the agricultural market. With good rainfalls and favourable growing conditions, the state is one of the best positioned in Australia.
Combine Harvester Sales are tracking sideways with levels at around half of last year’s sales and this trend is expected to continue through the harvest season. Baler sales continue to be the one high point in the market as the demand for hay is still strong. August sales were up 46% on last year and are now 22% ahead on a year to date basis. Finally, sales of Out-Front Mowers bounced another 10% in the month in preparation for the grass growing season, now sitting in line with last year’s comparison. Overall the TMA (Tractor and Machinery Association) has reported that confidence in the sector remains low, however, there has been a reasonable amount of deals happening with dealers looking to sell equipment at less margins than we normally see.
The secondary agricultural market, much like the new agriculture market has continued to do it tough throughout the last quarter with a lack of stock available on the market and the eastern states are still affected by drought condition, which has been reflected in the results across the country.
New South Wales saw surprising results given the current market conditions at an onsite auction that was held on a dairy farm in August, with a circa 2015 Massey Ferguson 7614 tractor in good condition selling $ 75,000 and achieved 94% of retail to another local farmer. At this same auction we saw a Supreme 900T Feed Processor sell for 100% of retail, this is due to beef cattle farmers not relying on specific feed diets and good quality processor machines do not appear in the secondary market very often.
The Victorian market has seen demand for smaller agricultural equipment and well-maintained machinery during the third quarter, with the highlight at our Melbourne auction being a well serviced John Deere 5820 4WD tractor and Loader that sold for $37,000 and reached 100% of retail. This is reflecting the same results we observed in the new agricultural market which sees Victoria play an important role in the current market.
|2004 John Deere 5820 4WD Tractor & 551 Loader||3,208 Hours||$37,000||100%||VIC|
|Supreme Feed Processor||$54,000||100%||NSW|
|2012 Massey Ferguson 5450 Tractor||6,634 Hours||$35,000||95%||QLD|
|Circa 2015 Massey Ferguson 7614 FWA Tractor||1,231 Hours||$75,000||94%||NSW|
|2015 Reform Metrac H7X Tractor||2,457 Hours||$30,000||90%||QLD|
|2014 John Deere 6140M FWA Tractor||5,677 Hours||$51,000||85%||NSW|
|2013 New Holland T6030 Elite FWA Tractor||4,054 Hours||$46,000||84%||NSW|
The Australian car market continued a concerning decline in the third quarter, with a 7.9% drop in sales across the sector in September, with a total of 88,181 vehicles sold compared to the 94,711 that were sold during the same month in 2018. Passenger cars are down 18.3% and light commercial vehicles have been down 5.4% for the quarter. The only rise in vehicle sales over the quarter is in the SUV segment which are up by 1.1%.
New South Wales saw the largest decrease of 10.6% in sales across the third quarter, while Victoria saw a drop of 7.6% followed by a decrease of 6.5% in Western Australia and 4.1% in Queensland.
Toyota continues to be best-selling car brand in Australia for the third quarter, however sales for the brand fell by 12.8% in September. Mitsubishi came in second for the quarter trailing just behind with the brand seeing strong results for the Triton ute and ASX compact SUV.
An interesting take out from our recent Valuation conference is the emergence of ride sharing and subscription car services. We are starting to see a shift to the traditional consumer car ownership, particularly in metro areas. Cars are only needed on weekends and rarely throughout the week, so more and more consumers are looking to car subscription services such as GoGet, Hello Cars and Car bar. These services provide flexibility with no servicing costs, the option to change car to a van or light commercial when needed and no registration or tax. With the popularity of Uber, Di Di and Lyft, short trips are cost effect so consumers can make do with public transport and ridesharing services. Some key statistics on the industry provided by IBISWorld can be found below:
These services offer a more affordable option with the average cost of running a car ranging from $8,000-$13,500 per year. Services such as go get can be set up for a $250 deposit, $30 a month subscription, and cars start at $6.50 an hour or $76 a day. Holden and Honda have launched their own services to try and tap into this growing market.
At the Valuation conference, we also dove into the current Australian automotive market and took a global and local look at the rise of electric cars. For the full presentations from the Valuation conference please contact firstname.lastname@example.org
Auction results in Victoria for secondary motor vehicles have continued to stay strong throughout the third quarter, however dealers and wholesalers have indicated that their sales have been average. With the increase in end users attending and buying from auctions, the value of the stock offered is increasing where traditionally dealers and wholesalers would have purchased these vehicles. As a result of this there has been a knock-on effect, which has left motor dealers working within tighter margins especially once the cost of warranties are factored in making it more difficult to purchase stock. The highlight for the quarter for our Victorian team was the sale of a 2017 Maserati Levante 3.0 Wagon that sold to an end user for $82,200 and achieved 83% of retail value.
In Queensland the falling new car sales market has had a noticeably positive impact on the Slattery auction results, with some vehicles finishing for retail value. This has been driven by the lack of trade-in vehicles available for dealers and pushing them to purchase wholesale or auction vehicles to meet demand. An example of this is a 2017 Toyota Landcruiser Sahara that sold for $84,000 and reached 90% of retail value. Late model commercial vehicles and SUV’s are the popular choices for the quarter in Queensland, with buyers having a strong preference for SUV’s over traditional sedans and dual cab utes such as the Toyota Hilux over the traditional Ford and Holden utes. This preference can be seen in the sale of a 2013 Toyota Hilux with 40,782 kilometers showing selling for $59,449 and reaching 100% of retail value.
New South Wales continues to see strong results for secondary cars sales and particularly in the sale of prestige and high-end SUV’s, this has been related to these vehicles being hard to come by in this market, which in turn brings in lots of competition by end users trying to purchase the vehicles. This has been highlighted in the sale of a 2018 Land Rover RR Sport with 11,126 kilometers selling for $125,000 and achieving 101% of retail and the sale of a 2017 Ford Mustang Fastback GT selling for $59,000 resulting in a 130% of retail value. Long wait times and limited stock within the dealer networks of prestige and performance cars means the consumer looks to ex demo or auction stock and is willing to pay. The overall highlight for the quarter was the sale of range of race cars at our Sydney auction at the beginning of the third quarter that achieved strong results. We offered a range of race cars and equipment for auction on behalf of Aussie Drive Search Pty Ltd (In Liquidation). This auction was well-advertised and the assets were highly sought after with over 50,000 users visiting the website to view the auction . The highlights from this auction were a 2013 Toyota 86 selling for $29,100, a 2017 Ford Ranger that achieved $34,800 and Peki Transport Equipment Race Car Transport Trailer that sold for $66,300.
|2017 Ford Mustang Fastback GT||12,131||$59,000||130%||NSW|
|2008 Ford Ranger Ambulance||30,045||$20,500||113%||WA|
|2013 Toyota Hilux||92,000||$25,400||109%||WA|
|2018 Land Rover RR Sport||11,126||$125,000||101%||NSW|
|2015 Honda Odyssey CTI-L||47,100||$28,770||100%||VIC|
|2017 Mercedes Benz AMG CLA 45||40,782||$59,449||100%||QLD|
|2018 Mercedes-AMG GLC 43||27,225||$81,500||98%||NSW|
|2013 Jeep Wrangler Overland||59,442||$25,500||98%||WA|
|2016 Holden Commodore SS-V Redline||25,474||$42,500||95%||QLD|
|2012 Toyota Landcruiser Workmate V8 Turbo Single Cab||129,255||$33,750||95%||QLD|
|2017 Holden Commodore Clubsport R8 LSV||8,971||$72,350||95%||QLD|
|2015 HSV Clubsport R8||30,840||$57,000||94%||NSW|
|2014 Range Rover Evoque||88,260||$32,150||92%||WA|
|2018 Audi RS4||88,260||$105,500||90%||WA|
|2017 Toyota Landcruiser Sahara||58,494||$84,000||90%||QLD|
|2016 Ducati H9 Panigale R Motorcycle||3,881||$20,000||90%||QLD|