Presenting Partner

Life Insurance Corporation of India

Moneycontrol

Budget 2022

Associate Partners:

  • Kotak Mutual Fund
  • Pharmeasy
  • Indiabulls
  • SBI

Presenting Partner

Life Insurance Corporation of India

Moneycontrol

Budget 2022

Technology Partner

Dell Technologies

Associate Partners

Kotak Mutual Fund
Pharmeasy
Indiabulls
SBI
UPCOMING EVENT:Are you 45+? Planning for retirement? We have just the right webinar for you - Planning for Retirement with Life Insurance on 27-Jan, 3pm. Register now!

Outlook on light, medium, heavy commercial vehicles

Prabhudas Lilladher has come out with its report on automobiles sector. According to the research firm newer players in the M&HCV Goods segment are gaining market share and are likely to grow at a faster clip.

April 13, 2012 / 12:59 PM IST
 
 
live
  • bselive
  • nselive
Volume
Todays L/H
More

Prabhudas Lilladher has come out with its report on automobiles sector. According to the research firm newer players in the M&HCV Goods segment are gaining market share and are likely to grow at a faster clip.


Steep 5% hike in excise duty (10-15%) on truck chassis in the Union Budget in mid March'12 pulled down truck sales (7.5 ton - 49 ton range) by 3.6%, while annual truck sales for fiscal 2011-12 increased by 8.8% as truck freight market in this period remained brisk with 10.6-18.3% jump in full truck load rentals on trunk route. LCV goods segment grew at a brisk pace of 33.9% in March’12, whereas for FY12, the growth in the segment stood at 29.8%. According to our assessment, it is unlikely that M&HCV Goods space will see a negative growth, whereas LCV Goods segment is likely to grow in 16-18% range in FY13E. Key findings of the IFTRT report are mentioned below:


Freight offering stable after a brisk pace witnessed in last few months: March 2012 (3rd March – 2nd April 2012) provided robust flow of freight traffic from the manufacturing sector as production units across the country, large, medium & small enterprises, witnessed 8-10% growth on trunk routes with peak production to achieve improved annual output by trade and industry. On the other hand, after 25-30% increased dispatches during October’11– February’2012 from fresh vegetables and fruits during winter months, the arrivals from these agri items has dropped by 10-15% during March 2012 and this has led to truck rentals remaining flat but firm on trunk routes.


Freight rates flat in the month of March’12: While January and February’12 witnessed 5-6% increase in truck rentals, it remained flat, but firm during March'12 over the previous month with 8-10% increase in the cargo flow from manufacturing sector despite drop in dispatches from fresh fruits and vegetables. The overall average monthly rental increase for April’11-March'12 witnessed 10.6-18.3% increase in truck rentals on trunk routes on the back of robust double-digit increase in cargo from agri-based items like food grains, cereals, fresh fruits and vegetables, while small and medium enterprises sustained decent flow of dispatches from manufacturing sector.


Tonnage capacity growth of 20% outpaces M&HCV Goods vehicle sales growth of 8.7%: During fiscal 2011-12, over 3.46 lakh trucks (5 ton – 49 ton capacity) have been added as against 3.18 lakh units sold in the corresponding period last year, resulting in estimated increase of 8-9%, but in each category (particularly in case of Intermediate goods carriages and multi-axle heavy trucks), the sales have been for extreme top end tonnage capacity trucks and this has culminated in increase of 20% in truck tonnage capacity in the current fiscal. Last year, 5.99m ton capacity was created and as against that 7.48m tonne capacity has been added in FY12. Hence, tonnage capacity added in this period is more than double of the truck units sold in FY12.


March’12 M&HCV goods segment decline restricted to 3.6%: Sales during March 2012 could have tumbled much more than a mere 3.6% drop but the damage was limited due to firm and buoyant truck freight market in the last quarter of fiscal 2011-12. Normally, truck sales during March every year display robust volumes as fleet owners compulsively purchase trucks to claim depreciation allowance under Income Tax Act and hefty discounts offered by dealers to achieve their annual sale targets.


LCV goods continues its brisk pace of growth @33.9% for March’12: Need for Hub and Spoke model has fuelled growth in the LCV Goods segment which has grown at a brisk pace of 21.4% CAGR for FY08-FY12E as against a 6.0% growth in the M&HCV Goods segment. Led by Tata Motors which reported a huge growth of 40.4% YoY for March’12 (Market share @ 61.3%), the LCV goods segment grew at a brisk pace of 33.9% for the month.


CV Goods grew at a brisk pace of 20.2% in FY12: Industry Truck sales (LCV & MHCV Goods segment) grew by 20.2% YoY during FY12 due to steady cargo availability and higher truck rentals to transport operators. For FY12, LCV goods segment grew by 29.8% YoY, whereas M&HCV goods segment (7.5-40T) grew by 8.8% YoY.


Truck rentals outpacing the cost increases: Since October 2009, the truck rentals have been outpacing the increase in fixed and variable operating cost of truckers and consistently truck rentals have been moving up during this period as nine quarters, beginning Oct 2009 till Dec 2011, witnessed increase in open market truck freight charges by 35-40% in the trunk routes as against 28-30% increase in fixed and operating cost for road transport.


Diesel price hike to be conveniently absorbed: Given the positivity expected from agriculture sector with record food grain production expected to cross 254.5m metric ton in the next fiscal and manufacturing sector likely to regain its momentum, the truck rentals in the coming months can conveniently absorb the diesel hike and still continue to earn stable revenues.


Newer players gaining market share: Relatively newer players in the M&HCV Goods segment are gaining market share and are likely to grow at a faster clip. Both Volvo-Eicher Commercial Vehicles (VECV) and Asia Motor Works (AMW) gained 110bps and 90bps in market share for FY12 to 11.2% and 3.3%, respectively. Pan-India presence led to an 8.7% YoY growth for Tata Motors (Market share @ 62.2%), whereas over-dependence on South led to 3.5% decline in sales for Ashok Leyland in the M&HCV Goods segment.


Bodies Corporate holding more than 50% in Indian cos


Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Sections
ISO 27001 - BSI Assurance Mark