After remaining stable till mid-October, Truck rentals on the trunk routes slid by 4-
5% in Nov’12 as cargo offerings slumped in the last fortnight (mainly SME sector)
after peaking during Diwali festival. Consequently, the gains made during Oct'12 by
way of 3-4% increase in rentals were eroded. Despite record discounts and soft auto
finance schemes, M&HCV goods segment declined by 36.0% YoY in Nov’12. YTD
FY13, the M&HCV goods segment declined by 20% YoY mainly on account of low
cargo offering across segments and higher base of last year. LCV goods segment
grew at 11.2% in November, with growth during April-Nov’12 at 18.8% YoY. We
maintain our view that M&HCV goods segment would de-grow by 14-16% in FY13E,
given the drop in freight availability and softening of truck rentals. In our view, LCV
goods segment is likely to grow in the range of 16-17% in FY13E. Key findings of the
IFTRT report are mentioned below:
Truck rentals slide by 4‐5% across various trunk routes: The truck rentals during
Nov'12 started falling in the second half of the month after stable period of first
fortnight of Diwali festival and resulted in a drop in truck rentals by 4-5% on
trunk routes, thereby, surrendering the gain of 3-4% in truck rentals on the back
of brisk cargo offeings during six weeks covering Oct'12 and period up to
November 14, 2012. The SME manufacturing sector, which provides 70% of the
cargo coming from entire manufacturing sector, is passing through tough times
due to pile-up of inventories on account of lower demand. The saving grace for
the truckers has been increased. Cargo offering from wheat and rice exports,
sustained domestic transportation of cement, tiles, sanitary material, pharma,
FMCG goods and increased arrival fresh fruits & vegetables that has helped in
stemming the further fall in their revenues.
Lower resale value for old trucks – a big negative: The most significant negative
development in the truck market has been the saddling of transport centres
with huge inventory of over 2.5 lakh heavy trucks which are awaiting resale and
the realisations / resale rates for various categories which are lower by 30-40%.
This has led to crisis in the trucking industry and truckers are not able to
generate working capital from sale of old trucks.
Postponement of the induction of new trucks: The truckers are putting on hold
induction of new trucks and fleet expansion despite heavy inducements coming
from vehicle manufacturers and therefore, indiscriminate fleet expansion by
operators has come to a halt because truckers have fresh memories of 2008-09
economic slowdown and resultant crisis in the truck transport business.
Scenario likely to be gloomy till Mar’13 : The multiple adverse impact of lower
cargo offerings, dropping truck rentals, slow down in manufacturing sector has
led to drop in sale of new trucks and continuous usage of old trucks in the
freight market as truckers are not able to dissolve their existing old fleet. There
is strong possibility that if the situation does not improve by way of Government
actions to boost its expenditure and demand, the truck rentals may face a
further slide in the coming weeks.
M&HCV goods segment de‐grew by 20% during Apr‐Nov’12 period: Despite
vehicle manufacturers offering discounts on purchase of new vehicles and
financiers offering low interest rates, there seems to be no substantial
improvement in volumes. M&HCV goods segment declined by 36% YoY, with
tractor trailer sales declining by 26.6% for the month of Nov 2012. YTD, the
M&HCV Goods declined by 20.0% YoY, with FY13E decline estimated at 14-16%.
LCV goods continues its growth trajectory @18.8% for April‐Nov’12 period:
Need for Hub-and-Spoke model and launch of new models has fuelled growth in
the LCV goods segment which has grown at a brisk pace of 18.8% for April-
Nov’12 period. Ashok Leyland’s LCV offering ‘Dost’ has received a good
response, thereby, helping the company to gain market share of 7.2% in this
competitive segment.
CV goods growth slows to 2.4% YoY during Apr‐Nov’12 period: The growth in
industry truck sales (LCV & MHCV goods segment) slowed to only 2.4% YoY
during Apr-Nov’12 period due to lower cargo availability and lower truck rentals.
The 20.0% YoY decline in M&HCV goods segment was compensated by a 18.8%
YoY growth in the LCV goods segment for Apr-Nov’ 12 period.
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