Volumes for heavy trucks - having capacity of more than 16 tonnes - grew more than 18% between April and August. Truck manufactures cite fleet-replacement demand for the trend and are confident that the industry won\'t witness yet another year of falling sales, which would have been the third in a row. \"Fleet operators realised that they cannot stretch replacement cycle beyond 6-7 years on account of two factors: first, they see a sharp drop in the resale value after six years and second, clients have been pushing them to replace their vehicles,\" said Ravi Pishorody, head of commercial vehicle business at Tata Motors.
\"Volume growth for trucks has been more in the cargo segment as long-distance transportation has picked up now. Sales of trucks in the 9-16 tonnes category are still weak, but expected to pick up with a lag.\" An average lifecycle of a truck is 15 years, and the first buyer usually owns it for 4-5 years. The owner gets nearly 50% of the initial price when he resells the truck after five years, but the value declines sharply with the vehicle becoming older. Because of weak market conditions, many of the fleet owners had deferred replacement by 2-3 years and now, with a pick-up in business, they are increasingly replacing the fleet. The first indication of the improvement in the segment has come from truck utilisation. Many of the big fleet operators have seen a perk-up in utilisation - to 70% in August from 60% in April. The second indicator is truck freight rate; it seems to have witnessed an increase of up to 3-4% since April 2014. Another is the resale value of trucks, which has been witnessing a tremendous improvement.
Truck makers expect sales to grow further from the second half of the current financial year. \"We are quite confident that in the fourth quarter of FY15, we would able to post a profit on the back of a robust sales environment,\" Pishorody said. Analysts predict MHCV volumes to grow 6% in FY15 and as much as 40% in the next financial year. And, the confidence of truck makers can be gauged from the fact that they have already increased orders to parts suppliers by as much as 30-40% for the current financial year. \"Most of the truck makers work on \'just-intime inventory\' method and hence, the increase in their orders indicates that it is led by robust demand growth,\" said Udit Sheth, executive director of Setco Automotive, which accounts for nearly 80% of clutches used in the MHCV segment.