NEW DELHI: Economic growth is subdued. The unemployment rate is high. Business and consumer confidence smarting under economic slowdown. It is pretty easy to say that most business owners are not doing well. In fact, the slump in the auto demand is having a rippling effect in the trucking business so much that their core rentals (a parameter for ascertaining pricing power) have fallen to the lowest level since demonetisation.
Data collated from Edelweiss shows core rentals have slid 15-20 per cent year-on-year in September 2019 and 30 per cent off pre-demonetisation levels. This is primarily due to the demand-supply mismatch coupled with nominal freight rates steadily falling more than fuel costs. In fact, with profitability worsening, small truckers have borne the brunt of a fall-off in utilisation and losses.
“Trucking capacity additions have been 7–9 per cent annually since FY16 while demand growth has been 5 per cent or below,” analysts from Edelweiss wrote. As many as 60 per cents of the one crore trucks in India are idle due to non-availability of cargo, while truck rentals have been under deep stress plunging by 15 per cent to 17 per cent since November 2018, according to a report by Indian Foundation of Transport Research and Training.
“The government is working for big corporates. But, the government is not paying heed to the plight of this sector which has seen over 60 per cent decline in fleet utilisation and more than 30 lakh jobs have been lost,” said Naveen Gupta, secretary-general, All India Motor Transport Congress, the apex body of transporters.
It is not surprising that commercial vehicle manufacturers such as Ashok Leyland and Mahindra have reported a sharp drop in sales by 70 per cent and 45 per cent, respectively, in August as truckers have put off their purchases in the last two quarters. Tata Motors has also seen a 45 per cent slump in overall sales.