Improvement in cargo flow will drive growth of used-truck market

G Balachandar Chennai | Updated on June 25, 2020 Published on June 25, 2020

Pricey BS-VI models also seen spurring demand for pre-owned BS III/IV vehicles

The growth in used-truck sales will hinge on strong improvements in cargo availability in the coming months even as the market is projected to be flooded with used trucks coming up for sale.

While the used-car market continues to see an increase in enquiries due to a shift in buyer preferences driven by the Covid-19 pandemic, the dynamics of the used-truck market are completely different. The pre-owned or used truck market was expected to see some spurt in sales due to the high price of BS-VI trucks and prevailing sluggish economic activity.

“Once all the CV players ramp up their BS-VI production, there will definitely be price pressures and given the considerable BS-VI mark-up, a surge in demand for well-maintained BS III/IV used trucks will be there,” says Satyakam Arya, Managing Director & CEO, Daimler India Commercial vehicles. There will be more used trucks of younger age in the market for sale as a large number of fleet owners and transporters face challenges in managing their vehicles due to shortage of working capital and inability to retain drivers.

“There could be a huge number of used trucks post-August, when the moratorium to pay EMIs is over. Thus, used BS-IV trucks shall be in demand as second-hand vehicle finance is rather easy and EMIs are low due to lower price of 2-3-year-old trucks,” says SP Singh, Senior Fellow and Coordinator, IFTRT (Indian Foundation of Transport Research and Training).

Industry representatives point out that despite the deep slowdown, there shall be a need to replace 8-10-year-old trucks to meet the demand for long truck routes. Also, they expect a resumption of activity in many segments, while rural areas have already shown some positive signals.

“The cargo flow and consumption demand are improving and demand to buy a used truck is improving in the post-lockdown period, especially in the rural markets,” says Umesh Revankar, Managing Director of Shriram Transport Finance, a leading player in the pre-owned truck market.

Under utilisation

But industry analysts feel that it is little too early for the used-truck market to see some action. The logistics industry has a high degree of fleet under-utilisation and with industrial production likely to remain subdued, cargo freight requirements are expected to remain flat as well.

Presently, commercial vehicles catering to essentials are faring better than those catering to industries as construction activity is yet to gather pace, while the manufacturing output is still down.

“We are expected to reach pre-Covid-19 levels of freight movement by the end of this year but that will not translate into additional fleet requirement. Therefore, it is highly unlikely that the used-truck market will do much different than the new-truck market,” says Paritosh Gupta, Analyst, Medium and Heavy Commercial Vehicle Forecasting, IHS Markit.

Meanwhile, diesel price increase in the past couple of weeks appears to have aggravated the challenges for fleet operators as fuel accounts for close to two-thirds of the running cost of a truck.

Published on June 25, 2020
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