Demand from a few key sectors such as construction, petrochemicals and oil & gas has driven up demand for more trucks to carry goods across the country. A rise in freight rates, coupled with the scrapping of older trucks, has also led to an increase in fleet utilisation over the last few months.
R Ramakrishnan, senior vice president (commercial vehicles), Tata Motors, confirmed to FE that he expected an improvement in fleet utilisation levels to about 70-75%.
?With a few road projects taking off and an increase in demand for petrochemicals and oil products along with transportation of more FMCG goods, we see more trucks being run,? Ramakrishnan said.
Last December, truck fleet utilisation levels had hit a low of 60%, but have since recovered to about 70%, say industry watchers. The trend will benefit not just fleet operators whose trucks have been lying idle, but also manufacturers who have seen sales stagnate or even fall over the last couple of years.
?Many routes are become busier especially with freight rates going up,? said Gagandeep S Klaire, director, Majha Transport, a medium-sized fleet operator running 300-350 trucks across the country.
More trucks on the roads is also good news for lenders such as Shriram Transport Finance, which finances the purchase of second-hand vehicles. Umesh Govind Revankar, managing director, said that the the number of trips that fleet operators were making had risen in the last three months driving up their revenues by about 10%. Revankar explained that the utilisation levels increased as operators scrapped some of their older trucks.? Also, older trucks being run not on the main highways but on other roads, in turn, pushed up the demand for newer trucks,? he pointed out.
Indeed, the upswing in demand for trucks signals a recovery for the sector. Nalin Mehta, MD & CEO, Mahindra Trucks & Buses, said the downturn had lasted more than two years. ?As business sentiments improve, new contracts are encouraging transporters,? Mehta noted.
SP Singh, convener of the Indian Foundation of Transport Research and Training, confirmed that fleet operators were replacing older vehicles, which led to a decrease in the number of vehicles to about 43 lakh, down one-fourth since January. ?While fleet operators still find themselves battling tough times with higher diesel prices and lower margins, there is some hope as fresh contracts have started to emerge in agriculture and FMCG sectors,? Singh said.