Too many trucks

In Japan, if you have 5 vehicles and clear certain conditions, you can start a transport business. Before the change in the regulation, a person who wants to start a transport business had to purchase the vehicles or had to show the sales contracts with car dealers, so he/she needed a reasonable amount of personal funds. But now, permits are issued even if they have their vehicles under lease agreements and there are more transport companies (mainly small to medium size companies who do not have much capital) with borrowed vehicles than companies who own all their vehicles.

However, these leased vehicles, which used to be convenient and beneficial tax wise, are now pressuring and affecting transport companies financially together with their downturn in sales and lack of their personal funds because of this dwindling economy.

A marine container transport company business owner said, “We cannot afford to pay the lease after our sales have been reduced by 30 – 40% compared to last year”. So people like him sell trucks with not much lease on to the dealers and cancel the contract for survival. Another transport company owner said, “Out of 20 trucks we have, half of them are leased. Our sales went down and the number of our trucks’ operating days is now 15 days/month average. We may not be able to pay the lease”. Usually, what lease companies do is that, if someone cannot pay the lease for more than 2 months, the case will be payment default and they organise to take the trucks back. Then, because it means the transport company is going to lose trust and credibility and this will cause trouble for the company when they want to borrow money from other finance institutions, it will lead to an even bigger loss for the company.

A truck dealer said, “We have people ringing us every day and asking if we can buy their leased trucks. The trucks are usually later model, new ones. If they have more than 80% of the lease left, if we buy them we will make a big loss; so we normally turn those ones down.”

Even at the dealers who buy these trucks, they have hundreds of trucks and trailers in their yard, mostly taken for a reason such as lease payments in arrears or transport companies’ bankruptcy, and waiting for an opportunity to be sold again.

Because of this slow economy, transport companies are not buying new trucks in a hurry and dealers have too much stock they cannot get rid of. It is unlikely this is going to change in the near future, either.

So if you are after a truck from Japan, now is the time!


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(Editor)
JPC TRADE CO.,LTD.
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