The decline in the truck rental signals the weak sentiment in the economy which reflects on the sustain de-growth of the commercial vehicle industry. As demand for freight remains weak, the fleet utilization stays low, thus impacting the demand of trucks.
The full truck rental for December slides slightly by 2-2.5% due to the general economic slump which impacted the overall cargo moment across the country. The factory output, fruit, vegetables, food items dropped on average by 10%-15% with sluggishness in import-export trade, while a large number of infrastructure projects are moving rather slow.
In the calendar year, 2019 the full truck rental was down between 10.4-19.4%; at the same time, the diesel price during this period went up by Rs.5.30/lit i.e. an average increase of 8.2% during the same period.
Indian Foundation of Transport and Research and Training (IFTRT) in its monthly report points that, The major drop in arrival of fruit and vegetables and food items in the APMCs and factory gates too generated lesser cargo with infrastructure projects continued to be on slow pitch, on the whole, cargo flow on trunk routes was lower by 10%-15% on account of general ongoing economic slowdown.
IFTRT says, as monthly fleet utilisation in last year and half has plummeted by 30%-35% for a truck running on trunk routes and is born out of economic slump, bordering on recession in some of the industries, consequently the monthly revenue of trucks in last two quarters, in particular, has plummeted by a cut of 35%-40% on reduced round trips on trunk routes with 4-5 days waiting period for return cargo on most of routes, the truck sales naturally have dropped by 40%-45%. Also, the higher expectation of pre-buying of BS-IV trucks to beat the introduction of high-cost BS-VI trucks has not translated into actual sales uptick.
Truck sales have plunged without any sign of pre-buying of BS-IV trucks taking place as migration to BS-VI is due from 1st April 2020. Also, the view across the industry is that the prices of BS-VI trucks likely to go up by 10-15% along with higher after-sales and maintenance costs.
However, there is a hope that the upcoming mandatory scrappage policy will help the industry with some additional sales. The policy awaits the government’s approval is expected to generate demand for new vehicles and help reduction in pollution.