Truck rentals remained range-bound and jittery, registering a 0-2% drop in July due to all-round slackness in dispatches from the farm sector, manufacturing sector and import-export trade. Despite record discounts and soft auto finance schemes, M&HCV goods segment declined by 18% y-o-y in July as truck rentals for the fourth successive month remained soft.
Multi-axle truck sales were down by 25.6% and tractor trailer sales slid by 21.7%. LCV goods segment grew at 14.6% in July 2012, with growth during April-July 2012 at 18.6% y-o-y. The M&HCV goods segment would degrow by 8-9% in FY13E, given the drop in freight availability and softening of truck rentals. ?In our view, LCV goods segment is likely to grow in the range of 16-17% in FY13E,? said research analysit Prabhudas Lilladher.
After a 8%-11% drop in truck rentals in Q1FY13, accompanied by a number of negative factors affecting the economy, July 2012 was no better as the rental remained range-bound and jittery with a 0-2% drop in the month. This was mainly on account of the all-round slackness in dispatches from the farm sector, manufacturing sector and import-export trade. The various truck manufacturers have opted for restricting their production during July 2012 on account of higher inventory with their dealers (due to slowdown in demand). This has led to lower availability of cargo to truck transporters in most manufacturing clusters in the country and hence has put stress on the truck rentals.
Drop in cargo flow from small and medium manufacturing units to the extent of 25%-30% resulted in trucks being idle at various centres for 3-4 days. The truck trips/turnaround has dropped by 10%-15% on trunk routes in the last four months. If the freight market does not improve in next couple of months, there is every possibility that repossession of delinquent trucks may enter an uncertain phase similar to 2009.
Given the micro economic environment and sluggishness all around, the truck transport, is pretty jittery. Therefore, the revenue of truck operators may further shrink during August-September 2012 unless the forthcoming festival season reverses the present negative business environment. The truckers are picking up less number of new trucks despite heavy discounts from automobile dealers and subvention to financers to maintain competitive EMIs to attract truck fleet owners. One need to be cautious on the M&HCV sales in the near-to-medium term.
According to analysits, M&HCV goods segment declined by 17.9% y-o-y, with multi-axle truck sales down by 25.6% and tractor trailer sales down by 21.7%, indicating stress in the system. The CV goods growth slowed to 3% y-o-y during April-July 2012 period. The growth in industry truck sales (LCV & MHCV goods segment) slowed to only 3% y-o-y due to lower cargo availability and lower truck rentals. The 17.9% y-o-y decline in M&HCV goods segment was compensated by 18.6% growth in LCV segment.
