Truck rentals up 3-4% in Oct

Last Updated: Wed, Nov 14, 2012 21:21 hrs

The demand for all commercial vehicles (CVs), other than light commercial vehicles, has seen a sharp decline in the current fiscal. Weak industrial activity and a general slowdown across sectors have made things only worse. However, since the government started rolling out its reforms, the general expectation was that the demand for CVs would also revive as industrial activity picked up. Analysts say that this is not likely just yet.

A key indicator of the CV market’s health is truck rentals. Truck rentals have moved up by three to four per cent in the month of October as have utilisations, on higher demand. Prabhudas Lilladher says October has seen buoyancy in truck rentals and increased fleet utilisation by 10-15 per cent, due to peak festival season and consumer spending on the one hand and increased arrival of fresh fruit and vegetables in the agricultural produce market committees.

Also, given that it is the season for paddy procurement in some states, the demand for trucks has gone up in the month, which has consequently pushed up rates. In September, rentals had gone up 12 per cent, after diesel prices were increased by Rs 5 per litre. However, the freight market was hit due to this steep increase in an already sluggish market. Despite the diesel price hike, truck rentals on key trunk routes in the first half (HI) of the fiscal declined by 1-3.8 per cent compared to the previous year.

While truck rentals will remain at the current levels due to the festive season in November too, any broad-based recovery has been ruled out. Any real uptick in the real economy is expected only in FY14. However, the road ahead is not likely to be easy for most CV players as competition has increased sharply.

For instance, Volvo-Eicher Commercial Vehicles (VECV) gained 170 basis points in market share during the April-October 2012 period to 12.6 per cent and 330 basis points in October 2012 annually. Ashok Leyland’s market share increased 270 basis points in H1 and 120 bps year-on-year in October, as against a 4.2 per cent decline reported by Tata Motors in the H1 period and 320 basis points decline in October market share.

The medium and heavy commercial vehicles (MHCV) segment has declined this year, despite heavy discounting and low auto finance rates. Analysts say this was mainly on account of low cargo offering across segments and higher base of last year. Analysts expect the MHCV goods segment to see a volume decline of 13-14 per cent in FY13, given the drop in freight availability and softening of truck rentals.

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