Home > Automobiles > Truck Rentals: Up for a fall?

Truck Rentals: Up for a fall?

Truck rentals from Delhi to southern destinations declined by Rs 1,000 per tonne due to lower cargo movement. Read why?Sales of trucks have risen by about 36% during the financial year 2010-11 over the year-ago level. Healthy growth in domestic economic activity translated into higher goods movement and rise in truck rentals. While the cost of truck ownership and operations also rose by way of higher interest rates, diesel prices and driver salaries, growth in truck rentals outpaced the rise in costs of ownership. This in effect resulted in higher fleet replacement and increase in ownership of trucks.

Data by Indian Foundation of Transport Research and Training (IFTRT) indicates a 17-20% jump in truck rentals compared with a 12% rise in costs of owning trucks during fiscal 2011.

In April 2011, truck rentals dipped by nearly 1-2% on a month-on-month basis. The April month usually witnesses a marginal slowdown in industrial production after a surge in the month of March. Also, movement of agricultural produce is lower compared to the December and March quarter each year when the kharif and rabi crops are transported post harvest.

Low resistance to rising rentals motivated fleet owners to add vehicles. Also, it is more profitable and reliable for logistics service providers to own trucks rather than outsource or lease them.

It must be noted that due to the fragmented nature of the freight and logistics industry, it is difficult to track capacity addition among fleet operators. While rentals have been rising at a faster pace than costs of ownership currently, costs are expected to catch up in the medium term, and there could be resistance to the unabated rise in rentals.

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