Truck rentals fall 2% on drop in cargo and diesel prices

Truck rentals on medium-haul and long-haul routes fell two per cent after the Rs 2 per litre drop in diesel prices from Tuesday. The fall in rentals comes on top of the 1.5 per cent drop in the first week of August after a similar drop in diesel prices on August 1, taking the total decline to 3.5 per cent this month.

The softness in truck rentals is largely due to poor availability of goods and drop in arrivals of fruit and vegetables because of rains, says S P Singh, senior fellow at Indian Foundation of Transport Research and Training (IFTRT).

Rentals had dropped 1-1.5 per cent on trunk roads in July due to 25 per cent drop in the arrivals of fruit and vegetables, a similar drop in arrival of pulses in wholesale markets, and weak activity in core and manufacturing sectors. Trunk road is an important main road used for long-distance travel. Diesel prices fell Rs 0.91 per litre in July and the Rs 2.01 per litre cut in diesel prices from August 1 was expected to push down rentals by 2-2.5 per cent.

As rentals and revenues of transporters have come under stress over the past 12 weeks, sales of heavy-duty trucks are likely to be hit. IFTRT's interface with automobile makers, dealers, and truck finance business reveals that till mid-August, actual funding has been 40-50 per cent lower than previous month.

IFTRT estimates that unsold inventory with truck dealers by the end of the month may go up to four weeks' level against 10 days' level in March; and truck manufacturers output and sales may drop by at least 15-20 per cent each for August, even as fleet owners fear GST (goods and services tax) rollout may hit fleet use.

Despite a sluggish economy, sales of medium and heavy commercial vehicles (5-49 tonne trucks) grew 20-22 per cent for 21 months and touched 278,000 units in the year ended March 2016. This is largely attributed to a low base effect a year ago.