New CM Cost Tables
Page 26
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reveal cost increases of up to 22 per cent
by Johnny Johnson
:OST increases of up to 22 er cent are the result of the ecelerating inflation experineed during the past 12 tonths, and the details of these asts are reflected in this ear's edition of CM Tables of iperating Costs which is soon ) be published.
Overall percentage increases tay vary with the size of the ehicle operated and the kind f operation in which the aulier is engaged. However, tking a 1-ton-capacity van as n example, the petrol version mwed a total operating cost I 16.61p a mile last year and .40p a mile this year, an 'crease of 16.79 per cent. The iesel version showed a 17 per n t increase, so the increases )r. both types almost coicided.
In contrast, the maximumapacity 32-ton artic operated t 1,000 miles a week and costig 28.53p a mile last year now asts 34.69p a mile or 21.94 er cent more.
Surprisingly, perhaps, the right spot in the up-dating of asts this year has been the 1,stricting influence of fuel rices which have moved less k real terms than might be taught.
It cannot be disputed that, t the pumps, the price of fuel as risen steadily and the gap etween petrol, and diesel has idened because the rate of 'AT on petrol has risen to 5 per cent while that on diesel as remained at 8 per cent. For the road haulage opera)r, however, there have been ame redeeming features, specially if he takes fuel devery in bulk.
;ulk deliveries
It will be recalled that last ear the oil companies introuced direct debit fot fuel purease and at the same time ithdrew the discount facilies for bulk buying. Although ie direct-debit system remains and most operators have to meet their fuel bills by the 20th of the month following delivery, it is possible. to obtain favourable prices for bulk deliveries; one recent quote was a reduction of 12 per cent for 3,000 gallons.
Thus, although the oil companies still insist that they do not offer discount, the price of fuel to the operator has been contained. The average price being paid for diesel is currently 47p a gallon while petrol costs about 54p on average. These prices compare with 46.5p and 47.5p respectively, last year.
The effect is to reduce the percentage of total cost represented by fuel costs. Petrol prices have caused only a small fall of perhaps 0.5 per cent of the total cost. In the case of diesel, the percentage of total cost had dropped from 9.6 per cent last year to only 8+ per cent this year at the lower end of the vehicle weight scale, and from 23 per cent last year to 19 per cent this year at the top.
In all other areas, price increases have been considerable, and the effect of this on total operating costs has been as much as 22 per cent, as already pointed out.
In detail, taking each factor in turn, licence duty has in-. creased by one third as the result ()f the April Budget; wages have increased, but because the November, 1974, settlement was anticipated, only a modest 10 per cent has been added this year; rent and rates have increased according to the district in which the operator finds himself but 25 per cent average has been added to last year's figures; insurance has been enhanced by 15 per cent; and, because vehicle prices have risen by 30 per cent since last year, that amount has been added to the interest charge. So far as running costs are concerned, fuel costs have already been dealt with, lubricants costs have been advanced by 10 per cent; 30 per cent has been added to tyre costs; maintenance costs have escalated 25 per cent; and depreciation is subject to the 30 per cent increase of vehicle prices as in the case of interest charges.
Electric vehicles
Looking at electric vehicles, which are growing in popularity, these are subject to similar increases as for those freight vehicle cost factors which apply. In addition, the price of industrial current has been increased by 18 per cent, and interest and depreciation on batteries and chargers has been increased by 10 per cent.
Some operators will not have experienced increases on the same scale as those which have been applied in CM Cost Tables. For instance, although the majority of insurance companies will have announced increases in vehicle insurance premiums in many cases in excess of that applied to last year's figures, a good claims record and a strong position for negotiation might easily have contained the threatened increase for particular operators. Moreover, the prudent operator will have reviewed his insurance arrangements on renewal and taken any opportunity which offered to obtain his cover at the most advantageous rate.
A disturbing feature of costing in the present economic situation is the danger inherent in using historical data in view of rapidly accelerating inflation To make provision for vehicle renewal on the basis of price paid for the existing unit, for instance, could leave a considerable cash shortfall when renewal becomes due. Even acknowledging the possibility of rates being pitched so high as to appear uncompetitive, it is perhaps prudent to build in additional costs so that the gap between what has been paid for the vehicles and what must be paid at some future date for replacements can be narrowed if not entirely closed.
This could be done by an attempt to forecast future price increases by the vehicle manufacturers and adding to the depreciation factor. Perhaps a more realistic Approach might be to increase the percentage added to costs for profit and contingency.
Vehicle renewal
In either course, care must be taken to isolate a special allocation of profit for the purpose of vehicle renewal at the end of the accounting period so that the cash' remains available for the object for which it was intended.
Despite the foregoing, no. attempts has been made in CM Tables to make provision for the increasing cost of vehicles. Historical data has been used, but only, because this is the most expedient course of action in compiling Tables of this nature. The operator, is strongly urged to plan ahead and try to forecast the amount of extra cash he will undoubtedly have to find to renew his vehicles in future.
The new edition of the Tables is due for publication this month. All postal requests should be addressed to Cashiers Dept, IPC Business Press, 40 Bowling Green Lane, London ECI—see the order form published on page 9 of this issue.