On the Phase out of 15-year Old Trucks (DoTr order 2017-009 )

Posted By Niels Ian Badillo| 23 Aug 2017

Attended this forum yesterday. (disclaimer: this is a long post on my position one of the subject matters)

Topics discussed are the following:

1. Implementation of the PNP memorandum on the accreditation of haulers for controlled chemicals

2. DTI’s requirements for the trade of potentially hazardous materials and ingredients for weapons

3. DoTr’s implementation of the DoTr order 2017-009

The one that concerns me is the last one. 

What is DoTr order 2017-009?

It is Department Order No.2017-009 – Reiterating Department Order No.2002-030 and Strengthening the Mandatory Age Limit for Bus Type Unit and Trucks Subject of or Covered by Certificate of Public Convenience (CPC).

Basically, it outlines the age limits of buses and trucks allowed by the government to oly the streets of the country (legally that is). I am forced to make that note because there are gray areas that some operators may ply to earn an extra penny. 

Based on this memo, buses with the age of 15 years from the date of manufacture and older will not be allowed to register and operate for public convenience ergo, they cannot load, deliver and trabsport materiel and personnel.

A same department order is issued to all public land transport covering taxis, jeepneys, school services, tourists buses, tricycles, etc. This ensures that ALL public land transport operators are covered giving a sense of fairness to all affected. 

To put things into perspective, public transport franchises are awarded to willing and able applicants by the government thru the LTFRB. This means that the government is the only entity that will provide public transport but since they cannot (due to asset base and universal best practice), they “outsource” public transport to franchisees (operators, truckers, haulers, jeepney owners, trike owners, etc.). That is why, they cannot hold the public hostage when they disagree with the governement policies or when they want to. 

Going back to the department order, stated as is, it is simple. If a trucker has a unit 15 years or older, they will take it out of circulation and scrap the unit (because there is no other alternative). If the owner want to continue with his trucking business, he needs to buy a new one and apply for a franchise (aka CPC or Certificate of Public Convenience). 

Might seem simple but here are the points (I will not bore you of the numbers so I’ll use * to quantify each)

Brand new truck

Cost of brand new 6wheeler tractor head (japanese brand) **********

Yearly operating costs ***

 This includes fuel, lubes, tires, batteries, consumables

Yearly owning costs **

  This includes registration costs, insurance, depreciation

Manpower costs *****

Expected Return of Investment 5-8 years


2nd hand refurbished (same japanese brand)

Cost of unit *******

Yearly operating costs *****

Yearly owning costs **

Manpower costs *****

Expected RoI 4-6 years

This shows that there are certain offsets and pros leaning to 2nd hand units. This is why 80% of truckers opt to follow that model. They can run their units almost infinitely because they maintain their units properly. 

Here is where it becones dicey. Remember those trucks we see in the news that caused accidents? They are part of a group of operators that run their trucks until they cannot run anymore. They do not care if their units cause accidents, they damage property or they cause loss of lives so long as they earn and make their living. 

Role of companies:

Companies like ours can greatly contribute to ensure the road worthiness, if not compliance to this department order by not accepting truckers who are not compliant. But that is one side of the coin, there are companies that do not care who they hire as long as their goods are delivered at minimal costs. This is the main reason why these kind of haulers propagate and gain a foothold in the mainstream market. 

Effect on industry and to us consumers

Buying new trucks will cause a spike in the truckers’ cost in the interim but this move will have benefits in the long term. In view of the ROI, there should not be a spike in trucking costs because the acquisition cost should be spread in throughout the ROI period (believe me, the ROI period I placed here is overstated). 

Here are some reasons why there will be resistance in the immediate upgrade. 

1. Big cash outlay- buying new trucks will require around 20% of the costs as downpayment. Some truckers still have a hand-to-mouth cashflow and this outlay will not be attractive UNLESS the banks will help them with low dowbpayment schemes. 

2. There is no current model in the country (not for the good and affirdable brands, that is) japanese brands present in the country are 2 years old here if they are brand new. What do I mean with this? Simply put, jaoanese brand new here are 2015 models because of import restrictions. I think the importers are working on it. Chinese, german and swiss brands have “modelo” models (current models) but they have high acquisition and/or operatibg costs. 

3. Parts availability- simply put gray market parts for trucks here in the country serves mainly 10years and older models. 

Bottomline, DoTr is implementing this to ensure everyone plying on our roads is safe. Old or new trucks, it is a questionnof roadworthiness. I know truckers with 20-year old trucks but has zero road accidents because they have great and well-trained drivers and well-maintained trucks. And on the other hand, I also know truckers with new units that meet accidents days after release from the yard. 

About the Reference
  • Niels Ian Badillo

    Niels is a sesasoned Logistics and Warehouse Manager, with years of experience with known companies in the Philippines. With expertise on Supply Chain Management

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