Truck sales hit a speed bump in Nov; more stress likely

According to estimates available with ratings agency Crisil, overall sales in the commercial vehicle segment (MHCVs and light commercial vehicles or LCVs) was under the 40,000-mark in November.

Sales of medium and heavy commercial vehicles (MHCVs) are estimated to have declined by 10-15% to 16,000-17,000 units in November after the government demonetised high-value notes, with industry experts revising downwards the growth forecast for the segment for the entire financial year.

According to estimates available with ratings agency Crisil, overall sales in the commercial vehicle segment (MHCVs and light commercial vehicles or LCVs) was under the 40,000-mark in November.

“Toll charges account for 10-12% of expenses for transporters. The exemptions extended by the government last month offset to an extent the loss in revenues due to lower freight availability post demonetisation.

Though the activity should improve this month, the impact would continue to be felt well into January. MHCV sales growth may be negative for the entire fiscal year,” said Prasad Koparkar, senior director at Crisil.

As per data available with industry body Society of Indian Automobile Manufacturers(SIAM), MHCV sales went up by 1.30% to 1,63,598 units between April and October this fiscal. Crisil earlier projected that MHCV sales would grow in the range of 2-3% in 2016-17.

Till December 3, steady contract rates exemption from toll charges and lower rates for sub-contracted fleet had helped large fleet operators maintain steady margins despite low freight availability.

Now with toll charges returning, lower freight availability could pull down margins by 5-7%, Crisil says in its latest research note. The going is expected to be tougher for small fleet operators plying in the spot market.

Truckers are dependent on cash for enroute expenses such as fuel, toll, boarding for drivers, repairs, payments to cargo loaders and unloaders. Fuel accounts for 60-70% of cash expenses and toll for about 10-12%.

Transporters have started procuring oil cards and fleet cards for cashless fuel purchases. The intensity of usage will indicate how much liquidity crunch the industry has seen, says Crisil.