Fleet owners start buying trucks on freight rate rise

Fleet owners are heading back to showrooms after a two-year lull, according to truck makers.

Owners who had decided to sweat their trucks in a slowing economy are back for replacements. Haulage rates rose over the past month and were expected expected to climb further, market watchers said, as power generation, mining, road building and construction revived.

"There is a change in the business environment. The power sector, dependent on coal, is seeing some activity. This has an impact on the truck sector. Fleet owners who had stopped buying have now started talking new trucks," said Rajive Saharia, executive director and head of Ashok Leyland’s global truck business.

The wheat harvest, a rise in fruit and vegetable arrivals, the growth of rural spending, shrinking truck fleets with national permits and an improvement in dispatches of consumer durables, general merchandise and housing construction material led to an increase of four-five per cent in haulage rates in May, according to the Indian Foundation of Transport Research and Training.

"We are certainly seeing a demand uptick with the reopening of new mines and other activities, and with improving infrastructure," said Anders Grundstromer, managing director, Scania CV India, a Volkswagen-owned Swedish maker of premium trucks and buses.

Typically, fleet owners replace trucks within seven years of buying. This was extended to nine years during this slowdown, truck makers said.

The extension of excise duty cuts would help bring back buyers but sales would depend on a general improvement in the economy, they said. "Truck buyers would not have held back purchases had there been no extension of the excise duty cut. But this will add to improved sentiment," Saharia added.

Recent trends in haulage rates suggest truck operators are now able to pass on the rise in diesel prices. Freight may climb with an improvement in the economic situation, leading to better use of fleets, a business review by Tata Motors, India's largest truck manufacturer, said.

Tata Motors, which has 50 per cent of India’s commercial vehicle market, is idling half its capacity. The company reported a fall of 29 per cent in sales last year, higher than the industry’s 20 per cent decline.

BLARING THEIR HORNS

• 5% increase in freight rates over the past month; expected to climb further
• Rise in economic activity led to this
• Truck owners who had decided to sweat their trucks are back for replacements
• Extension of excise duty cuts also helping