Expect Trucking Freight Rates Improve by 20% in 2020........ BS6 is Coming

Hello Friends!

Indian Trucking Industry has seen some of the most challenging times in last 12-18 months.

Let's first see what lead to Over-Capacity leading to Freight Rates Crashing and what is likely to happen over next 12 months for Rates to move up.

Rates Falling Due to :

• Axle Load Changes began to have impact on Freight Rates as over-night Trucking Industry had 25% Capacity Addition with NEW AXLE Load
• Start Ups Funded by VCs / PE went overboard with LOWEST RATES to win business from FMCG / FMCD players as they were wanting Faster topline growth to increase valuation
• Customers went more aggressive on REVERSE Auctions leading many Gamblers to Gamble away their fleet on below operating cost freight rates.
• Faster Turnaround due to Check Post / Borders vanishing post GST / FASTAG
• Delay in Scrappage Policy meant that a BS2 truck was competing against BS4 Trucks for Same freight
• Easy Financing from NBFCs meant that Fleet Operators Added Fleet even when Capacity was Available and there was no need for extra trucks
• Falling GDP growth meant that available load was less, and Capacity Increase only made it worse

In nutshell, the Industry went through a secular decline in freight rates while over-capacity meant that everyone was struggling to get hand on whatever load was available at whatever rate

Rates Could Rise Due to :

• Significant correction in Trucking Capacity due to Banks / NBFCs repossessing trucks from Fleet operators who could not restructure loans / EMIs
• Economic Growth is at its Lowest and trend Starting to Reverse on limited government stimulus
• Start Ups have been looking for "PATH TO PROFITABILITY" as VCs reduce funding for loss-making companies. Many raising Venture DEBT and would be forced to earn a decent return from their operations.
• NBFCs/ Banks Cautious on lending for new trucks leading to close to 50% drop in Sales of new Commercial Vehicles in M&HCV
• BS6 Vehicles start to roll out from 1st April 2020 leading to 5-7% Cost increase in purchase of Vehicles
• Scrappage Policy should be announced in next couple of months, leading to old CVs getting scrapped over next 12 months
• Consolidation likely to happen with Many Small and Medium Players already out of business and others may merge or get acquired

On Positive Note, this Industry is the Backbone of Indian Economy, and if your back is weak, you cannot stand on your feet

Hence, we hope 2020 to be the year of Rejuvenation and hope Customers Pencil in, up to 20% Freight increase in their annual budgets

Look forward to Good Times for Everyone.