PL INDIA: Automobiles - CV Goods Segment - Trucks Rentals range-bound

PL INDIA

 

Automobiles

Sector Update – CV Goods Segment : Truck Rentals range-bound

Truck rentals remained range-bound and jittery, registering a 0-2% drop during July 2012 due to all-round slackness in dispatches from agri sector, manufacturing sector and import-export trade. Despite record discounts and soft auto finance schemes, M&HCV goods segment declined by 18.0% YoY in July as truck rentals for the fourth successive month remained soft. Multi-axle truck sales were down by 25.6% and tractor trailer sales slid by 21.7%. LCV goods segment grew at 14.6% in July’12, with growth during April-July’12 at 18.6% YoY. We maintain our view that M&HCV goods segment would de-grow by 8-9% 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:

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n  Truck Rentals fall for the fourth consecutive month; range bound with 0-2% decline: After an 8-11% drop in Truck rentals during Q1FY13, accompanied by a number of negative factors affecting the economy, the month of July 2012 was no better as the rental remained range-bound and jittery with a 0-2% drop during the month. This was mainly on account of the all-round slackness in dispatches from agri sector, manufacturing sector and import-export trade. The various truck manufacturers have opted for restricting their production during July 2012 on account of higher inventory with their dealers (due to slowdown in demand). This has led to lower availability of cargo to truck transporters in most manufacturing clusters in the country and hence has put stress on the truck rentals.

n  Number of trips decline 10-15% during April–July period: Drop in cargo flow from small and medium manufacturing units to the extent of 25-30% resulted in trucks being idle at various centres for 3-4 days. The truck trips/turnaround has dropped by 10-15% on trunk routes in the last four months. If the freight market does not improve in the next couple of months, there is every possibility that repossession of delinquent trucks may enter an uncertain phase similar to 2009.

n  Current ground level situation pointing towards stress in the system: Given the micro economic environment and sluggishness all around, the truck transport, is pretty jittery. Therefore, the revenue of truck operators may further shrink during August-September 2012 unless the forthcoming festival season reverses the present negative business environment. The truckers are picking up less number of new trucks despite heavy discounts from automobile dealers and subvention to financers to maintain competitive EMIs to attract truck fleet owners. We remain cautious on the M&HCV sales in the near-to-medium term.

n  M&HCV goods segment de-grew by 17.9% during Apr-July’12 period: M&HCV goods segment declined by 17.9% YoY, with multi-axle truck sales down by 25.6% and tractor trailer sales down by 21.7%, indicating the stress in the system.

n  CV goods growth slows to 3.0% YoY during Apr-July’12 period: The growth in industry truck sales (LCV & MHCV goods segment) slowed to only 3.0% YoY during Apr-July’12 period due to lower cargo availability and lower truck rentals. The 17.9% YoY decline in M&HCV goods segment was compensated by a 18.6% YoY growth in the LCV goods segment for Apr-July’ 12 period.