Mumbai: The logistics sector faced significant headwinds in November 2024, with truck rentals on major trunk routes dropping as fleet utilization fell to a concerning 60%. This decline, driven by regulatory and regional factors, underscores challenges in India’s transportation and logistics landscape.
Key Factors Behind the Decline
- BS4 Truck Ban in NCR Region:
The ban on BS4-compliant trucks in the National Capital Region (NCR), aimed at addressing air pollution, has disrupted logistics. Goods now require transshipment at the NCR border, where they are transferred from BS4 trucks to smaller BS6 or CNG vehicles, leading to increased logistics costs and delays. This regulatory shift has hit trucking activity hard, particularly in one of India’s busiest regions. - Polling Activities in Maharashtra:
The state election season dampened logistics activity as local disruptions slowed the movement of goods. - Weak Urban Demand:
Urban consumption remained tepid due to high food inflation, increased borrowing costs, and muted wage growth, further reducing demand for transportation services.
Key trunk routes saw a significant drop in rental rates, with Delhi-Chennai-Delhi and Delhi-Bengaluru-Delhi routes witnessing declines of 1.4% and 1%, respectively.
Shriram Finance Speaks Out
Y.S. Chakravarti, MD & CEO of Shriram Finance Ltd., noted, “The post-festive slump in logistics is apparent, with truck utilization dropping to 60%. While rural demand has shown signs of recovery, weak urban consumption and regulatory challenges have placed immense pressure on the trucking industry. However, robust agricultural output provides a glimmer of hope in an otherwise subdued sector.”
Mixed Trends Across Vehicle Segments
While trucking and commercial vehicles struggled, other segments showcased contrasting trends:
- Two-Wheeler Sales Soar: Sales surged 27% month-on-month, benefiting from a spillover of festive demand from October.
- Tractors on the Rise: Agricultural tractor sales jumped 29% month-on-month, fueled by a strong monsoon and optimistic Rabi crop expectations.
However, passenger vehicle sales fell sharply by 36% MoM, attributed to the withdrawal of festive season incentives. Commercial vehicle sales also suffered, with bus sales declining 32%.
EV Market Struggles
The electric vehicle (EV) sector continued its downward trend, with two-wheeler EV sales dropping 19% MoM and EV car sales plummeting by 38%. Despite an October boost from festive offers, the sector is awaiting momentum from upcoming launches to reverse this slide.
Fuel and Toll Trends
Diesel consumption rose 7% MoM, and petrol usage grew marginally by 0.3%, reflecting steady fuel demand. FASTag transactions increased by 4%, indicating higher traffic volumes. However, total toll collection dipped 0.7% MoM, suggesting shorter trips or a higher share of smaller vehicles.
As the logistics sector navigates these challenges, the focus shifts to how upcoming regulatory changes, agricultural outputs, and vehicle launches will shape the industry in the coming months. The industry’s ability to adapt to these pressures will be critical to sustaining growth.
