BackAxle norms may put brakes on demand for trucks in short-term
The revised axle norms permits current trucks plying on the roads to carry 12-25% higher payloads
Premium
Mumbai: The stellar run for trucks in the past one year is likely to be cut short over the next few weeks following a revised notification issued on Monday by the ministry of road transport and highways on the maximum safe axle weight for heavy commercial vehicles.
Apart from reducing the permissible weight that can be carried by a single axle with two tyres from 7.5 tonnes to 7 tonnes, the revised notification permitted current trucks plying on the roads to carry 12-25% higher payloads.
“The above maximum safe axle weight shall be considered for revising the gross vehicle weight (GVW) of the vehicles, subject to overall limits specified in paragraph 2 for the existing vehicle models, that are manufactured in accordance with the type approval certificate granted prior to 16 July 2018," the notification said.
On 16 July, the MoRTH had increased the permissible GVW of heavy trucks (GVW higher than 16 tonnes) by about 12-25% across a combination of body types, axles and tyres. At the time, it was unclear if existing vehicles would be permitted to carry higher loads as per the new norms. With the revised notification, clarifying retrospective application, about 40-45% vehicles in the heavy trucks segment maybe impacted.
Demand for new trucks is likely to be impacted in the short-term owing to a number of reasons, analysts and industry executives said.
“As systemic capacity increases, wholesale and retail will certainly be impacted in the near term, as will production schedules, because fleet operators may defer purchases," said Shamsher Dewan, vice-president (corporate sector ratings) at Icra Ltd. He added that OEMs (original equipment manufacturers) may also indulge in higher discounting to clear existing inventory. In the heavy trucks segment, discounting is a norm rather than an exception. “The revised norms will cause some deferment (of purchases) until new trucks with higher tonnages become available," said Pawan Goenka, managing director, Mahindra and Mahindra, during an analyst call on Tuesday. He added that retail sales of Mahindra’s heavy-duty truck Blazo slowed in the second half of July.
India’s largest truckmaker, Tata Motors Ltd, too, witnessed weak sales in the same period, Girish Wagh, president of the commercial vehicle division of the firm, told Mint in an interview last week. Complying with the new norms will have material cost implications, which manufacturers “must be prepared for", since the entire truck’s design, including the brakes, steering, powertrain and suspension, will have to be reconsidered, said Wagh, adding that prices will rise as well.
Though analysts have expressed concerns over a reversal in preference for higher-tonnage trucks owing to greater overall capacity in the system, Wagh expects the trend to continue owing to lower operating costs for transporters. Heavier trucks also have higher profit margins for manufacturers.
Vinod Aggarwal, managing director and chief executive, Volvo Eicher Commercial Vehicles (VECV) Pvt. Ltd concurred. “I see a lot more opportunity coming from the replacement cycle, as there will be more improvement in the products. Transporters are also focusing more on productivity and cost. The efficiency of existing trucks will reduce if transporters begin to carry heavier loads."
Industry observers said that the current momentum in infrastructure building and consumer demand will stabilise truck sales for the remainder of the fiscal year. “With the way the economy is moving and all the relevant sectors, which impact transportation are performing, underlying demand itself is very positive and will remain so for the next one to two years," Aggarwal added.
Dewan of Icra put the growth forecast for heavy trucks at 8-10% for the current fiscal year. However, long-term demand uncertainty remains as “the systemic capacity will go up faster in the long term and may slow down the replacement cycle after a few years", wrote Kapil Singh and Siddharth Bera, analysts at Nomura Financial Advisory and Securities (India) Pvt. Ltd, in a 17 July note
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
