New payloads stipulated in MHCVs

{in Tonnes) | Mcv | Mav | T-Trailer

Previous GVW EG es xy 7 | 36 40 49
Previous Payload | 5 1 16.5 21 26 | 23 27 35
Kerb weight | 7 1 85 10 1 | 12 13 14
GVW as per new norm | 185 1! 28 35 42 | 395 45.5 55
New Payload | 445 | 195 25 31. «| «275 32.5 44

————

% increase in rated payload! 28% | 18% 19% 19% | 20% 20% 17%

 

Source: CRISIL Research
Truck demand from bulk goods transporters to remain low due to axle norm in the coming fiscals as well

Although axle norms increased freight carrying capacity of trucks by ~20%, the benefit would only be availed by
transporters ferrying bulk goods which constitute 35-40% of the truck movement. Movement of bulk goods in
billion tonne-kilometers (BTKM) terms via road fell marginally in fiscal 2020 amidst the ~20% rise in capacity
for bulk goods transporters. Therefore, bulk goods transportation via roads would continue to face overcapacity
in the coming fiscals hampering new truck purchases.

However, transportation of voluminous non-bulk goods (60-65% of truck movement) which, while being
unaffected by axle norm, were impacted by slowing consumption demand in FY20. Moreover as some bulk
transporters already were overloading near or moderately above the new payload levels, the impact of axle norms
for such transporters would be lesser.

Shift from T-Trailers to higher tonnage MAVs: After implementation of the axle norm, the payload of the
erstwhile 37T would increase to 31T which would be similar to the erstwhile payload of a 40T T-Trailer. Also,
erstwhile 49T T-trailer’s payload has now increased from 35T to 41T. Rated load availability at the 41T mark is
expected to be lesser than at 35T. Moreover, issues like driver availability and lower maneuverability plague T-
Trailers. Because of these reasons, higher tonnage MAVs are likely to be more desirable than T-Trailers.

Truck body code to lead to ~5% rise in cost of ownership; norm likely to have been postponed

All goods vehicles (>3.5T GVW), manufactured either by a vehicle manufacturer or a body builder on drive-way
chassis vehicles, will have to comply with the provisions of AIS-093 (Rev. 1) in two stages - the first level of
compliance in October 2018 and the second stage in October 2019. We believe compliance with this code is
expected lead to a cumulative price rise of ~5%. However, we expect implementation of this code to have been
differed.

With standardization in truck body building, we expect consolidation among truck body builders as small players
may not be able to meet testing requirements. With standardization, financiers are expected to be more willing to
fund the generally unsupported body building cost. This will reduce the initial down payment, minimizing the
impact of the 5% rise in cost of ownership.

Fuel efficiency norm likely to be enforced by fiscal 2023

To make heavy duty trucks and buses more fuel efficient, the Ministry of Petroleum and Natural Gas, MoRTH,
and the Ministry of Heavy Industries are in talks to notify fuel efficiency norms. We expect the norm to be
enforced by fiscal 2023. Based on talks with various stakeholders, BS-IV-compliant diesel vehicles of categories
M3 and N3, with GVW of 12T and above, will have to comply with these norms. Vehicles are expected to meet
the ‘target diesel fuel consumption' value for a specific set of speeds, which is dependent on the vehicle’s GVW,
axle configuration, and category (N3/M3).

Outlook on Indian automobile industry

Commercial vehicle

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