BackSoaring freight charges throw a spanner in works for auto firms
Truck operators are charging a premium of 30-40% for moving finished vehicles and raw materialsA hefty increase in transportation costs will impact the cost of producing vehicles
PremiumInflated freight costs are acting as a spanner in the works for automakers and their parts suppliers as they start to reopen factories after a two-month halt due to the countrywide lockdown.
Truck fleet operators are charging a premium of 30-40% for transporting finished vehicles, parts as well as raw materials across routes connecting industrial zones and ports, said five industry officials.
“The cost of transporting goods is very high right now as transporters are charging premium freight. They say that they are offering more salaries to the truck drivers to get them back to work but drivers remain insecure about job stability and health risks," Rakesh Sharma, executive director, Bajaj Auto Ltd said last week.
He said Bajaj Auto’s plan to ramp up production from June to 75% of capacity across its facilities hinges on the availability of trucks to procure components and transport finished vehicles, besides the demand scenario.
“We are paying a premium to get things moving due to lesser number of truck drivers available. The per unit transportation cost is much more right now," said Manoj Kolhatkar, managing director, Gabriel India Ltd, a leading manufacturer of vehicle shock absorbers.
A hefty increase in transportation costs will impact the cost of producing vehicles. This may force automakers to pass on the additional costs to customers through higher vehicle prices. Companies may also decide to absorb the increased costs, given the weak covid-19-induced demand scenario, which would then hurt their profit margins.
Gaurav Vangaal, associate director, light vehicle production forecasting at IHS Markit said the shortage of truck drivers is part of a larger problem of labour scarcity, which the automotive manufacturing is starting to face.
“The truck drivers are part of the skilled workforce as they drive multi-axle car carriers, which any regular truck driver cannot drive. The automotive industry is struggling to transport finished goods and raw materials. While a large number of migrants have moved back to their hometowns, the government has just started arranging for their return from the bigger cities. They may choose not to return to the industrial parks and manufacturing belts," Vangaal added.
S.P. Singh, senior fellow at the Indian Foundation of Transport Research and Training (IFTRT) however termed the shortage of truck drivers a temporary problem.
Singh said fleet operators are charging more because there is insufficient load for their return journeys.
“One way load rentals are up by 25-30% as truckers are not sure of full truck load on their return journey," Singh said, adding that truck drivers have started to return to work over the past two weeks.
According to Singh, one-way freight charges for an 18-ton payload multi-axle truck would be ₹75,000 between Delhi–Mumbai.
Singh estimates that only 30-35% of the entire fleet of 5.2 million trucks in India has been operational in May.
“Although the rentals are more currently, the bigger underlying issue is of demand because there are thousands of trucks standing idle," Singh added.
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