Lower fleet utilisation due to poor freight availability across cargo segments and consequent drop in freight rates threaten to spoil the prospects of truck pre-buying that the commercial vehicle industry expected would kick-in in the next few months ahead of BS-VI norms.

Along with other vehicles segments, commercial vehicle segment is also going through a depressing sales trend on yearly as well as sequential basis.

The market continues to exhibit subdued demand on the back of slow down in manufacturing output and consumption. Customers are postponing purchases given the lack of freight and the falling freight rates impacting their viability. NBFCs that finance more than half of the new truck sales are not in robust health and tight liquidity is affecting vehicle financing.

S P Singh of IFTRT (Indian Foundation of Transport Research and Training) pointed out that liquidity situation was better with regard to truck financing. But falling freight rates, lower fleet utilisation due to poor cargo availability from manufacturing and agri sector and negative consumer sentiments are the major causes for demand shrinkage.

At the beginning of the year, auto parts industry was given to understand that pre-buying of trucks will start in the third of fourth quarter of this fiscal. However, they are also sceptical about it now.

“Pre-buy is supposed to increase the volume. Now I have a basic doubt. When there is no demand or sluggish demand, why would somebody buy trucks? When there is demand I will pre-buy. But if the demand is sluggish, I would just wait. Why would I pre-buy just because it is going to cost ₹2-3 lakh more later,” felt L Ganesh, Chairman of Rane Group.

Rajesh Kaul, VP & Product Line Head, M&HCV, Tata Motors admitted that there were high expectations in the industry around pre-buying before the expensive BS-VI vehicle roll out in April 2020.

But, the impact of BS-IV pre-buy, however, has to be assessed objectively in terms of the current fleet utilisation levels, current industrial fleet age composition, capital and revenue expenditure roadmap and challenges in vehicle financing due to gestation in new emission regime.

“We are still hopeful that few LFOs (large fleet operators) and MFOs (medium fleet operators) operating under strategic long term investment plans for contractual freight markets are eyeing BS-IV pre-buy to offset BS-VI acquisition cost impact and in all probability, the effect will be upside as we go ahead during the year,” he said.

Though, this time the monsoon isdelayed and erratic so far, the industry expects it to be normal.

“A normal monsoon may result in better freight availability, improved utilisation of the existing fleet, and support for freight rates,” said Kaul.

Meanwhile, industry hopes for some measures in the budget that will spur consumption which will boost cargo flow.

Related Topics