Relaxation in axle norms leads to demand for lower tonnage trucks

Difference between tonnage and volume growth has widened sharply in October

A relaxation of axle load norms is leading to a trend reversal in the truck market. Against the usual trend of tonnage (carrying capacity) exceeding the vehicle sales volume growth, the growth in tonnage is now lower than volume growth. The new axle load norms led to an increase in rated load capacity of trucks, allowing transporters to carry additional weight.

This, along with a relaxation on overloading in certain states, has led to a decline in contribution from higher tonnage vehicles in overall sales. “We are witnessing an increase in demand for higher deck length vehicles. This is indicative of customers' desire to utilise the higher permissible load for each tonnage point. Early trends do indicate a shift to lower tonnage trucks at few nodes. Going ahead, gradually the demand would stabilise at the nodes which provide best operating economics for a given application and usage,” said Girish Wagh, head of commercial vehicle business unit at Tata Motors, the largest commercial vehicle player in the domestic market.

While this trend reversal has been witnessed since July 2018, the difference between the tonnage and volume growth has widened sharply in October with volume growth of 17.1 per cent versus tonnage growth of just 2.5 per cent. This indicates an increased shift towards lower tonnage vehicles, post the announcement of new axle norms, said a recent report by Motilal Oswal.

The financial services firm said this trend is in line with the expectation of a shift towards lower tonnage vehicles, but the pace and magnitude have been a negative surprise so far. “The continuation of the trend observed, particularly in October 2018 poses a potential risk to realisations and margins of commercial vehicle manufacturers,” it said.

Earlier, the transporters in the lower tonnage segments faced challenges due to the increased cost of operations resulting from similar driver costs, fuel, insurance and increasing finance costs. “The revision in the axle norms is intended towards helping them earn more revenue, thereby helping transporters to increase their profitability,” added Wagh.

In the past, a stricter implementation of overloading ban had led to tonnage shift to higher-tonnage segments such as 37-tonne trucks and 49-tonne trailer from 25-tonne and 31-tonne rigid trucks and 40-tonne trailer. That is again changing. Take the case of cement transporters. Earlier they preferred a truck with tonnage capacity of 37 tonnes but now they are opting for a 31-tonne truck that can carry 35 tonnes of load.

Vinod Agarwal, MD & CEO at Volvo Eicher Commercial Vehicles said there is a realignment taking place in demand after the revised axle norms. “Transporters want to utilise the optimum load under the revised norms to minimise transportation cost,” he said.

The increase in axle load, announced in July, applies to heavy vehicles with a gross vehicle weight (GVW) of 16.2 tonnes and above. The GVW of a two-axle truck has moved up from 16.2 tonnes to 19 tonnes. Similarly, the GVW of a five-axle truck increased to 43.5 tonnes from 37 tonnes. The maximum permissible load in case of trucks went up from 41 tonnes to 49 tonnes. The maximum GVW of a tractor-trailer is now 55 tonnes against 49 tonnes earlier.