In this section we have tried to analyze the trucking industry in depth. Before we dive into the details, we thought it helpful to remind readers that trucking industry is the most fragmented industry since the organized player has less than 15% of the market share and no requirement for industry to report the industry capacity (as in the case of railway and airline industry). The traffic flow and cost data is not collected in a systematic and regular way. So, data available on industry capacity, population and scrap age is not authenticated data, but it in the same time it gives us the essence where the industry is heading in the presence of large number of small fleet owners, huge capacity and the competition given by rail.
Based on the study forecast demand model that is build upon industrial and agriculture composition that generate freight and replacement demand, we expect 10-12% of growth in CV goods segment over FY07 to FY09 as the freight will increase by 12-13% YoY and the replacement demand will be 37-38% of overall sales. The trucking industry is going through the consolidating period with better operating economics of new trucks (better fuel efficiency and load carrying capacity), construction of highways and overall buoyant economics (that industrial growth of 7% and agricultural growth of 3%) that all sustenance for better structure of industry which support the 10-12% growth in CV demand. In addition, a positive step taken by Supreme Court in banning the overloading for robust industry by giving verdicts that overloading cannot be legalized by the schemes like the issuance of golden passes, has caused freight rates to remain strong improving profitability of fleet operator despite high diesel prices and operating cost will drive the CV growth in future.
Commercial Vehicle goods Industry set to grow yet another year on year after five consecutive years of growth from FY02 to FY06. The CV sales had grown by 26% CAGR from FY02 – FY06 that was due to increase in 12% freight and strong average replacement demand of 55% on overall sales. Replacement as a percentage of 5-6years old vehicles has also surged due to weak sales of CV in FY98-01 from 26% to 48%. In moving forward study expect the industry to behave in the same with strong support from economic activities.FY 02-06 has seen near identical growth rates for M&HCVs and LCVs segment. In contrary there is shift within the segment like revolutionary launch of Tata’s Ace in LCV segment has reverse the demand of below 3.5 tonnes vehicle with 3.5 < 7.5 tonnes vehicle (i.e. in FY02 sales of 3.5<7.5 vehicle was 25% in overall sales which is now 13% and in case of below 3.5 tonnes it was 13% which rises to 27%) and able to catch the attention of transporter which take the goods to end user. Moreover looking forward in future some new models in LCV segment can change the dynamics of the segment with more interchange within the segment can happen. In M&HCV segment which has also outperformed with the increase in demand of 25 tonnes vehicle that offset the high price of fuel with better fuel efficiency and fast turnaround time has also changed the customer preference in this segment.
