‘Truck rentals up 7-8% in October-November’

Mamuni Das New Delhi | Updated on November 17, 2020

High price of diesel and tyre, apart from pent-up demand post lockdown period, driving up rates, says research firm IFTRT

Truck rentals in October and November have been higher by 7-8 per cent as compared with the same period last year, according to Indian Foundation of Transport Research and Training (IFTRT), a research firm that tracks the sector.

“This was because inputs such as diesel and tyre, that account for 90 per cent of the variable operational cost, have become pricier this year as compared to last year,” said SP Singh, Senior Fellow, IFTRT. He added that pent-up demand post-lockdown has also contributed to this.

Sequentially, truck rates have gone up. In October, they were up by 12 per cent as against the previous month and rates were higher by 3 per cent in November as compared with October.

The sequential increase in truck rentals is expected to continue till November-end in the medium- and long-distance segment. Truck rentals are expected to be at the same level throughout November this year, according to IFTRT. Almost one-third of truck drivers have gone on leave to their native places for festivities in the second and third week of November this year.

Harvesting season

The truck rentals in mid-November, 2020 were higher by 3 per cent also due to higher arrival of winter fruits and vegetables in the agriculture mandis and continuing kharif crop procurement by government and private trading houses, stated IFTRT. “This was due to bumper kharif crop harvesting, peaking of pent up demand in festival season and a spike in spending in tier - 1, 2 and 3 cities,” stated IFTRT.

The rise in truck rates are expected to start lowering in December.

The sequential growth witnessed in September and preceding months this year has reflected in the performance of logistics companies. In a research note on Mahindra Logistics for the quarter ended September, Yes Securities noted that the company has seen pick‐up in logistics activity and normalcy on a monthly basis. However this must be seen against the low-base effects resulting from partial lockdowns that began in March this year.

Auto sector

Commenting on sectors driving growth, Alok Deora of Yes Securities, said: “Auto segment has seen good demand from smaller cities and rural sector. Two-wheeler has picked up while medium and heavy vehicles have remained weak and expect such trend for several quarters. The second half fiscal 2021 will be better than first half especially for the automotive sector.”

Similarly, for the quarter-ended September for TCI Express, Sayan Das Sharma of Bank of Baroda Capital Markets Limited, said in a research note released this month, “The demand continues to improve sequentially, with September nearing pre-Covid levels of activity and October surpassing year-ago revenue levels. Economic recovery has been broad-based across client segments.”

Published on November 17, 2020

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