India Increases Maximum Weight Trucks Can Ferry

India increased the maximum weight heavy trucks can carry first time in 35 years in a relief after a recent crackdown on overloading.

Implications

The move will be applicable for new vehicles as there is no clarity on whether older vehicles are covered, Vishnu Mathur, director general of Society of Indian Automobile Manufacturers, told BloombergQuint.

Kaushik Banerjee, president and chief executive officer at non-bank lender Magma Fincorp Ltd., said amid rising fuel prices, it’s a smart move by the government to legalise overloading as it was happening anyway. “The move is beneficial for both borrowers and lenders (involved in a project) and would augur well for commercial vehicle makers in the medium term.” The challenge would be on the implementation front, he said.

Here’s what the brokerages had to say on the new loading capacities:

Nomura

• Proposed truck axle load relaxation led to sharp correction in Ashok Leyland and Tata Motors.
• Impact on truck demand depends on execution of proposed norms.
• If implemented on existing vehicles then demand for new vehicles to be impacted.
• If implemented on new vehicles then positive for short-term demand.

BoFA-ML

• Proposed rated load to be increased by 15-25 percent.
• If implemented on current fleet, then it will impact demand for new trucks.
• Change in norms to bring down the existing overloading issues.
• Impact of these norms is difficult to gauge as it depends on state-wise implementation.
• Uncertainty to remain an overhang for stock prices of Ashok Leyland and Tata Motors.

Crisil

• It will have a visible impact in interstate movement, which accounts for the bulk of primary freight and where overloading is limited.
• Spot freight rates would soften.
• Small fleet operators would be impacted as efficiency gains from being able to carry more rated load per trip would be passed on through lower spot rates.
• Fleet utilisation would fall, impacting CV sales.

More demand for commercial vehicles is coming with companies such as Amazon and Flipkart using more transport to move goods around, said Pashupati Advani, founder, Global Foray. The move is not going to impact CV makers’ stocks that much as overloading was happening but some movement would be seen in scrips like Ashok Leyland, he added.