Truck rentals on trunk routes across the country have hit reverse gear. After a brief pause in July, rentals have declined 3% to 4% during August mainly due to a 15%-20% drop in cargo availability across the country with a 4-5 days average waiting time for return load.
Despite record discounts and soft auto finance schemes, the M&HCV goods segment declined by 10% YoY in August as truck rentals, for the fifth successive month, remained soft. The LCV goods segment grew at 15.8% in August, with growth during April-August at 18% YoY. Going by the trend, M&HCV goods segment would degrow by 9%-10% in FY13E, given the drop in freight availability and softening of truck rentals.
According to Surjit Arora, research analyst, Prabhudas Lilladher, ?The LCV goods segment is likely to grow in the range of 16%-17% in FY13E.
Truck rentals on the trunk routes declined 3% to 4% during August with 15%-20% all-round drop in cargo availability across the country. Most of the dispatches of fresh fruit and vegetables are lower by 25%-30% in the APMCs. Barring cement, steel, pharma and FMCG goods, the dispatches have seen a drop of 8%-10% from auto components/parts, hardware items, tiles/marbles, sanitary items, furniture and fixtures, motor vehicles, steel-moulded products, consumer durables, electrical goods, stationery items and general merchandise.
The SME sector, which provides almost 70% of the cargo from the entire manufacturing sector to the truck transport business, is the worst hit, he added.
August is crisis month for the truck transporters in the country in comparison to same month in last two years as trucks at the leading transport centres are waiting for at least 4-5 days to get the return loads to their base station because of the lower cargo availability across the segments.
If the freight market does not improve in the next couple of months, there is a strong possibility that repossession of delinquent trucks may enter an uncertain phase similar to 2009.
Arora said that while new truck sales during last 5 months have seen a double-digit decline, a very disturbing development in the market for second hand truck sales is taking place as owners and old vehicle sale-purchase brokers in the major trucking centres are unable to push their vehicles. As a result, prices of second-hand trucks have dropped by 15%-20% in last six months in comparison to previous six months. This has forced the truck owners to hold back any compulsive replacement of the old vehicle with new trucks as the freight market is not encouraging.
According to Arora, given the micro economic environment and sluggishness all around, current ground level situation points to a stress in the system. Most of the fleet owners are pinning their hopes on a recovery in the truck freight market during the festival season.