India Autos: Revised Axle load norms - Impact analysis

The Ministry of Road Transport and Highways has increased the maximum permissible axle loads and hence truck tonnage by ~15%.

Jul 19, 2018 04:07 IST others

The Ministry of Road Transport and Highways has increased the maximum permissible axle loads and hence truck tonnage by ~15%. Although strict interpretation of the notification would apply the revision to new trucks, there have been news reports of it being made applicable to existing fleet. Given that ~60% of trucks usage is volume-based (implying no scope for increasing loads) and a significant portion of the remaining is already being overloaded, the impact of these norms would not be significant. We estimate only a 4-5% volume impact over FY19-20. However, near-term impact may be higher, given high level of uncertainty.
 
Strict interpretation of the notification implies prospective amendment: The notification prescribes the maximum permissible axle load for various trucks. Increase in ‘maximum permissible load’ may not increase the GVW of old trucks, which have been certified for a lower tonnage by OEMs and testing agencies. The way forward would be for OEMs to develop and get certified higher tonnage vehicles on same number of axles, which may take a few months. This may involve changes to chassis, axles, steering, tyres, brakes, etc. Fleet operators may choose to delay new truck purchases till availability of higher-tonnage trucks. Although near-term demand may be negatively impacted, we do not see a lasting impact.
 
Applicability to old trucks implies formalisation of existing overloading practices: Some news reports suggest that the new norms may be extended to old trucks. This may be through re-certification of existing fleet or a tacit approval for overloading without any re-certification requirements. We believe re-certification of 2.5-3.0mn trucks that are currently on the road would be impractical and time-consuming. On the other hand, if all fleet operators start overloading immediately to take advantage of the norms, it may impact truck demand over FY19-20.
 
Potential 4-5% impact on FY19-20 volumes: About 60% of trucks’ end-use is volume-based (e.g. oil tankers, 2Ws, cars, etc.), where higher tonnage would not enable higher loads. In the remaining ~40% of trucks use, there is significant overloading already being practised. We estimate that if the non-volume-based trucks that are currently not overloaded start being overloaded, it may impact truck demand by 4-5% over FY19-FY20.

Figure 1: Change in Maximum Axle Loads
*Max load per axle Old cap Revised cap Change
1A ‐ 1T 3.0 3.0 0%
1A ‐ 2T 6.0 7.5 25%
1A ‐ 4T 10.2 11.5 13%
2TA ‐ 8T 19.0 21.0 11%
3TA ‐ 12T 24.0 27.0 13%
Source: Government Notifications, IIFL Research; *Note: A = Axle, T = Tyre, TA = Tandem Axle

Figure 2: Change in Maximum Permissible Load per truck
Max load per truck Old tonnage Revised tonnage Change
Rigid 16.2 19.0 17%
Rigid 25.0 28.5 14%
Rigid 31.0 36.0 16%
Semi‐articulated 26.4 30.5 16%
Semi‐articulated 35.2 40.0 14%
Semi‐articulated 40.2 46.0 14%
Semi‐articulated 35.2 40.0 14%
Semi‐articulated 44.0 49.5 13%
Tractor trailer 36.6 42.0 15%
Tractor trailer 44.0 51.5 17%
Tractor trailer 44.0 55.0 25%
Tractor trailer 49.0 55.0 12%
Average increase 15%
Source: Government Notifications, IIFL Research
 
Figure 3: Change in Maximum Permissible Load per truck
Scenario Way forward
Applicable to new trucks
  1. OEMs to take a few months to develop and get approval for higher tonnage vehicles
  2. Fleet operators may delay purchases of existing trucks till new higher tonnage vehicles are available
  3. No medium‐term negative; strict implementation of overloading ban may be a positive
Applicable to all trucks, incl. existing Option A (Re‐certification of existing fleet)
  1. There are 2.5‐3.0mn trucks on the road today
  2. Making modifications to existing 2.5‐3.0mn trucks and getting them approved for higher tonnage would be impractical and time‐ consuming
  3. In effect, this would take one to Scenario I above
Option B (Unofficial formalisation of overloading)
  1. All fleet operators start overloading starting today
  2. Expect small impact on truck demand over FY19‐20 (Figure 4)
Meanwhile, OEMs would take a few months to develop and get approval for higher tonnage vehicles
Source: IIFL Research 
 
Figure 4: Potential impact on new truck sales
Break-down of trucks (current usage) Population of trucks (current usage) Impact of revised norms on old trucks
Volume-based 60%  1,560,000 0 No impact
Weight-based
(no overloading)
16% 416,000 (62,400) 15% higher tonnage availability, impacting new truck requirement
Weight-based
(15% overloading)
16% 416,000 0 No impact
Weight-based
(30% overloading)
8% 208,000 31,200 15% lower tonnage availability, benefiting new truck requirement
Sum 100% 2,600,000 (31,200)
FY19 sales 349,600
FY20 sales 391,552
FY19+FY20 sales 741,152
Impact over two years -4%
Source: IIFL Research

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