Light and medium duty trucks are not impacted as the new norms are for vehicles with above 16.2 tonnes gross vehicle weight (GVW).
Braking and steering systems, drivetrains, tyres and axles are among the parts that are likely to be affected. Suppliers of these parts said that the extent of re-engineering required is minimal.
A senior executive at the local unit of an international tyre maker said existing tyres could cater to trucks ferrying an incremental load of 20%-25%, similar to the increase in load capacity made by the MoRTH notification.
“We will develop tubeless tyres, which are more suited to carrying higher loads for long distances at high speeds, for more applications in the Indian market," the executive said on condition of anonymity.
A business development executive at a Pune-based manufacturer of driveshafts and axles for commercial vehicles also said their parts do not need to be drastically redesigned as they are built to carry over 40% more than the rated payload.
However, truck makers are yet to firm up their strategies and approach vendors as they are awaiting more clarity from the government, both the executives said. Industry executives and analysts are at loggerheads on how the market would behave in the long run.
Gopal Mahadevan, chief financial officer of Ashok Leyland Ltd, one of the country’s top truck makers, said the notification is “not a big hit as it formalises an existing informal arrangement (overloading)".
“India is an overloading market, so demand (for vehicles with higher payloads) will not come off," Mahadevan said during an analysts call on Wednesday.
The extent of overloading is as high as 50-60% on intra-state transportation routes, and thus rampant across the country, Jinesh Gandhi of Motilal Oswal Securities Ltd wrote in a 16 July note.
After the revised notification comes into effect, replacement demand for trucks will depend highly on the prevalence of overloading as it determines the total operating costs for transporters.
Abhay Firodia, president of industry body Society of Indian Automobile Manufacturers also said the notification is “a move in right direction" as it would “improve the efficiency of commercial transport in the country".
“With the modernization of India’s roads and highways, it is natural for the government to look at higher load-carrying capacities in trucks," he said, adding that the removal of restrictions in combinations of tyres and axles against a permissible GVW is “also a welcome step" as it “allows easier and more flexible development of new vehicle configurations of different tonnages".
Kapil Singh and Siddharth Bera, analysts at Nomura Financial Advisory and Securities (India) Pvt. Ltd, wrote in a 17 July note that “in the long term, the systemic capacity will go up faster and may slow down the replacement cycle after a few years".
However, replacement demand has been a major driver of commercial vehicle (CV) sales as it accounted for 60% or more of total volumes during the best years of CV sales, according to Hetal Gandhi, director at advisory firm Crisil Research.
Singh and Bera believe higher replacement demand will drive growth only if the norms are applicable to new trucks, adding that there is a risk of existing trucks beginning to overload.
“Thus, the impact on truck demand will depend on how strictly the government will implement this (ban on overloading). In the very short term, buyers may wait for the new models to arrive and OEMs would need to upgrade existing inventory to comply with higher axle loads. This may impact demand negatively for a few weeks", they said.
Following the notification, shares of Tata Motors Ltd, India’s largest commercial vehicle manufacturer, fell 2.2% to a fresh 52-week low of ₹ 251.95 on Wednesday on the BSE, while the benchmark index Sensex shed 0.4% to 36,373.44 after hitting a lifetime high.
A Tata Motors spokesperson said the heavy trucks segment market leader is “studying" the notification “with respect to engineering and certification implications".
Ashok Leyland saw a 14% plunge to ₹ 110.6 on the BSE.