Truck utilisation rate at five-year high even before festive sales

Sales at India's top four manufacturers advanced by a fourth to 95,122 units in September

The average truck utilisation rate for transporters rose sharply in the September quarter, making it the best in five years amid robust demand from the industrial and agriculture sectors. Typically, the demand is subdued during the three month period due to monsoons, but this year has been an exception. Led by higher sales of consumer durables and other goods, the demand is expected to grow further with the onset of the festive season later this month. 

“The September quarter has been the best in five years in terms of capacity added in tonnage terms, freight and utilisation rate,” said SP Singh, a senior fellow at the Indian Foundation of Transport Research and Training (IFTRT), a Delhi-based think-tank.  Consistent output in the manufacturing sector has helped, he pointed out. Others agreed. 

The country’s industrial production grew at 6.6 per cent in July 2018 on the back of good performance by the manufacturing sector and higher offtake of capital goods and consumer durables. Factory output, measured by the Index of Industrial Production (IIP), had expanded by just 1 per cent in July 2017, according to the data released by the Central Statistics Office (CSO). As many as 22 out of 23 industry groups in the manufacturing sector showed positive growth during July 2018, it said. The strong demand has helped transporters command higher truck rentals and offset the increase in diesel prices, which, on average, have gone up by Rs 16  from January to September. 

A better operational viability and utilisation has prompted them to invest in new trucks, pushing up sales of such vehicles in September, according to the monthly sales data released earlier in the week. 

Sales at India’s top four manufacturers including Tata Motors, Ashok Leyland, Volvo Eicher Commercial Vehicles (VECV) and Mahindra and Mahindra advanced by a fourth to 95,122 units in September over 75,835 units a year ago, the companies said. Growth has largely been fuelled by sales of high-tonnage (vehicles with a gross vehicle weight of 16 tonnes and above) multi-axle vehicles.

“This quarter has been excellent for most of us,” said Vinod Aggarwal, managing director and chief executive at VECV. The demand was being led higher-tonnage vehicles, which boast better technology, lower cost per kilometre and longer service intervals, he said. All these factors have improved truck operators’ financial viability.

Girish Wagh, president (commercial vehicle business unit) at Tata Motors, said “strong economic activities along with growth in the IIP and core sectors have resulted in a strong growth momentum for the CV industry.” 

Sales of Tata Motors’ medium and heavy-duty trucks grew by 32 per cent, while other segments also saw an equally strong momentum.

Truck rentals, an indicator of demand-supply scenario, have gone up by 5-6 per cent during September as a result of buoyant double-digit increase in cargo offerings from factory gates as well as steady flow of fruits, vegetables and food products. A consistent engagement of truck fleet in the infrastructure sector has also boosted demand and helped rentals, said IFTRT. Truck rentals on a round trip from Mumbai to Delhi for instance, rose to Rs 96,350 on September 1 from Rs 90,900 on August 2, showing a 6 per cent increase. In absolute terms, it’s up by Rs 15,350 from January to September, it added.

But not everyone is happy with the quantum of hike in truck rentals. According to N L Gupta, managing director at Caravan Roadways, the hike is not commensurate with the sharp rise in fuel and other costs. The price of diesel has gone up by Rs 16 since January and this should ideally translate into an increase of 12 per cent in truck rentals, he said. “The increase in freight is yet to show the impact of fuel price. What we are seeing now is purely being led by supply-demand dynamics,” Gupta pointed out.