AUTO: Takeaways from interactions with fleet operators - strong freight demand augurs well for CVs
We interacted with two large fleet operators to get an update on underlying business environment for commercial vehicle demand and preferences of fleet operators. Freight demand remains buoyant auguring well for incumbents, whereas fleet operators are willing to try new generation trucks but unwilling to experiment with new CV players. Key highlights:
Strong freight demand, requirement of higher owned fleet to drive CV demand
- Buoyant economic activity has driven improvement in freight demand, with ~20-30% YoY growth in freight tonnage from all the key segments like steel, cement, auto, FMCG, polymers etc.
- However, operators are impacted due to issues with iron ore mining in Karnataka, Goa and Orissa, resulting in existing fleet remaining idle.
- These large fleet operators enter into long term annual contracts with their customers for transportation of goods. They transfer 10-15% of the total goods through their owned fleet, rest is transported through contracted vehicles. Driven by their customers’ requirement, these large fleet operators are required to increase proportion of owned truck (to ~30-35%) to better service and offer customized solution, translating into demand for CVs.
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