Fleet utilisation at record low as slowdown puts transporters in slow lane

Written by Rachit Vats | Mumbai | Updated: Dec 23 2013, 08:36am hrs
With fewer goods being ferried across the country in a slowing economy, fleet utilisation has hit an all-time low of 60%. With fleet operators finances in trouble some are incurring losses many are opting to return the trucks they bought. Industry estimates put the number of trucks that have been taken back by non-banking financial companies (NBFCs) at 5% of the roughly 6 million trucks currently on the road.

Just two years back we were operating our fleets at 90% plus but today were running at just about 60% levels, said Geetesh Dakliya, who runs a fleet of 400 trucks across the southern states. Dakliyas trucks ferry cement and steel products and the ban on mining iron ore in Karnataka is one of the reasons why his business has been hit.

But the story is much the same for other operators whether theyre transporting vehicles or consumer goods. While larger operators who run fleets of more than 500 trucks and medium players 300 to 500 trucks have managed to hang in there, several of the smaller ones have been forced to exit the business.

Nalin Mehta, MD & CEO, Mahindra Trucks and Buses, a new entrant in the medium and light commercial vehicles segment, confirmed that freight utilisation was down to some 60-65% and that operators were under pressure. Fleet operators have not seen a time worse than this and their road freight utilisation might drop further to 50%, Mehta said.

While on the one hand revenues of operators have been hit because smaller volumes of goods are being transported, higher diesel prices have pushed up costs, said Umesh Govind Revankar, MD, Shriram Transport Finance. Revankar added that November has been one of the worst months for the truck industry. His firm finances purchases of second-hand trucks but currently operators dont have the ability to buy either new or second-hand trucks given that some of them are running at a loss and margins for others have plummeted.

Even a deep discount of Rs 3-5 lakh on trucks priced in the Rs 17-18 lakh range is not incentive enough.

In 2008 we made net margins of 12-15% but now were running up losses, said Manoj Sahu, owner, Ganpati Caring Transport Corporation, which owns a fleet of 400 trucks, pointing out that this is despite the fact that there has been a marginal 5% rise in freight rates (per 7, 9, 16 and 22 tonnes) in CY13 on a year-on-year basis. However, this was more than neutralised by diesel costs surging over 30% in the last 24 months.

All costs including those for insurance, manpower, fuel and toll have gone up. Fuel, which accounted for 40% of costs early this year, has risen to 52-55% levels now, said out Gagandeep S Klaire, director, marketing, Majha Transport.

According to Vivek Narayan, who operates a medium-sized fleet company based in Dhanbad and operates on the New Delhi-Mumbai route, the cost per trip has gone up by about Rs 6,500 for a 16-21 tonne truck.