Demand PDF

Contents
iii
Demand-supply
Sections
3.1 Review of demand 42
- Historical demand 42
- Historical demand drivers 46
3.2 Future demand drivers 62
- Factors affecting demand in the long-term (goods vehicle segment) 62
- Factors affecting demand in the short-term (Goods vehicles) 68
- Factors affecting demand for buses 70
3.3 Demand outlook 72
- Short-term demand outlook 76
3.4 Demand forecast methodology 78
- Goods vehicles 78
- Buses 80
- Limitations 81
3.5 Annexure 82
Boxes
3.1 Market segments 51
3.2 Transportation sector 52
3.3 Profitability of truck operators 54
3.4 Commercial vehicle financing 60
3.5 Purchase of commercial vehicle 68
Chart
3.1 Profitability of truck operators 54
Figures
3.1 Demand for commercial vehicles 42
3.2 GDP growth versus demand for CVs 43
3.3 Annual growth rate in demand for CVs 43
3.4 Demand for LCVs 44
3.5 Demand for M&HCVs (Goods vehicles) 45
3.6 Demand for buses 45
3.7 Categorywise share in demand for goods vehicles 46
3.8 Total freight movement and economic activity 47
3.9 Fuel price versus demand for goods vehicles 50
3.10 Trend in freight movement of truck operators 55
Continued...
CRIS INFAC COMMERCIAL VEHICLES ANNUAL REVIEW: SEPTEMBER 2002, 164 PAGES i
...continued
3.11 Economic growth versus capacity utilisation of truck operators 55

3.12 Growth in freight movement and capacity utilisation 56
3.13 Fuel price versus freight rates 57
3.14 Capacity utilisation of truck operators and freight rates 57
3.15 Profits of truck operators versus demand 59
3.16 Projected total freight movement 62
3.17 Categorywise share in demand for goods vehicles 66
3.18 Categorywise share in population of goods vehicles 66
3.19 Categorywise share in BTKM capacity of truck operators 67
3.20 Seasonality in demand for goods vehicles 69
3.21 Seasonality in index of industrial production 69
3.22 Projected passenger movement 70
3.23 Trend in registered buses in India 70
3.24 Trend in the reported net losses of STUs 71
3.25 Share of goods vehicles over the age of 5 years in population 77
Tables
3.1 Freight movement: Share of rail and road 47
3.2 Freight rates: Railways versus road 48
3.3 Buses: Demand 49
3.4 Rail versus road infrastructure 50
3.5 Transportation sector: Truck ownership 52
3.6 Freight rates 56
3.7 Truck operators: Trend in profitability 58
3.8 Profitability of transporters using MCV or MAV 59
3.9 CV financing: Market share 60
3.10 Road infrastructure: New projects 63
3.11 Truck operators: Future capacity utilisation 64
3.12 Truck operators: Future operating costs 65
3.13 CVs: Demand forecast aggregates 72
3.14 Commercial vehicles: Demand forecasts 74
3.15 Goods vehicles' demand forecasts: Sensitivity analysis 74
3.16 CVs: Production and sales 82
3.17 M&HCVs: Production and sales 82
3.18 LCVs: Production and sales 83
3.19 Commercial vehicles: Regionwise sales 83
3.20 Trucks: Regionwise sales 83
3.21 Buses: Regionwise sales 84
3.22 LCVs: Regionwise sales 84
3.23 Goods vehicles: Payload tonne per vehicle 84
3.24 Goods vehicles: Sales (Payload tonnes) 85
3.25 CVs: Population on road 85
continued...
ii CRIS INFAC COMMERCIAL VEHICLES ANNUAL REVIEW: SEPTEMBER 2002, 164 PAGES
...continued
3.26 Goods vehicles: Vehicle population on road 86

3.27 Goods vehicles: BTKM capacity 86
3.28 Goods vehicles: BTKM capacity 87
3.29 Truck operators: Capacity utilisation 87
3.30a Truck operators: Profitability (MCV - 16 tonnes GVW) 88
3.30b Sensitivity analysis: MCV - 16 tonnes GVW 88
3.31a Truck operators: Profitability (MAV - 25 tonnes GVW) 89
3.31b Sensitivity analysis: MAV - 25 tonnes GVW 89
3.34 Truck operators: Assumptions for cost structure 91
3.35 CVs: Demand forecasts for terminal life regulation 92
CRIS INFAC COMMERCIAL VEHICLES ANNUAL REVIEW: SEPTEMBER 2002, 164 PAGES iii
Demand-supply
The demand for commercial vehicle is driven by a number of factors,

such as growth in industrial and agricultural production, growth in
freight movement, share of road, changes in freight rates and fuel
prices, profitability of truck operators and STUs, and government
policies. The sales of commercial vehicles were at a peak of 0.24
million in 1996-97 and declined at a trend rate of 6.3 per cent
during the 1996-97 to 2001-02 period. The recovery in demand
for commercial vehicles in 1999-2000, when sales increased by 22
per cent, was not sustained in 2000-01 and 2001-02. The decline
in sales was mainly due to the slow-down in the growth of industrial
and agricultural production.
In 2002-03, the demand for commercial vehicles is expected to

increase by 9-10 per cent over that in 2001-02. During the 2002-
03 to 2006-07 period, the demand for commercial vehicles is expected
to increase at the CAGR of 6 per cent, to 0.19 million vehicles.
Even at these growth levels, the expected increase in demand for
commercial vehicles during the 2002-03 to 2006-07 period, would
only partly recover the level of demand corresponding in 1996-
97. However, there would be growth in value terms due to the
increasing share of higher tonnage vehicles.
This chapter gives the review of demand for the commercial vehicles
and explains the impact of various demand drivers in the past.
Further, the chapter gives short-term and long-term outlook on demand
for commercial vehicles, with respect to demand drivers in the future.
For instance, the impact of an alternative scenario of implementation
of terminal life regulation has been considered, mainly from the
perspective of understanding the potential demand growth for commercial
vehicles during the 2002-03 to 2006-07 period.
Also, the demand forecast methodology adopted by CRIS INFAC

has been discussed along with its limitations. In the relevant sections,
the chapter describes cost economics of transportation sector and
vehicle financing.
CRIS INFAC COMMERCIAL VEHICLES ANNUAL REVIEW: SEPTEMBER 2002, 164 PAGES 41
Review of demand
3.1
Historical demand
Overall trend in demand for commercial vehicles
During the 1991-92 to 1996-97 period, sales of commercial vehicles increased at the trend growth
of 14.5 per cent. Sales of commercial vehicles were high during the 1994-95 to 1996-97 period, with
an all-time high sales of 0.24 million commercial vehicles in 1996-97. The high growth in sales of
commercial vehicles during this period was driven by the significant growth in the sales of goods
vehicles, including medium and heavy commercial vehicles (M&HCVs) and light commercial vehicles
(LCVs), as a result of high level of growth in industrial and agricultural production.
Sales of commercial vehicles declined during the 1996-97 to 2001-02 period at the trend rate of 6.3
per cent, to 0.14 million commercial vehicles in 2001-02. The significant decline in sales was mainly
due to the decline in the growth of industrial and agricultural production. The trend rate of growth
in GDP (industrial) declined from 9 per cent during the 1991-92 to 1996-97 period, to 4.3 per cent
during the 1996-97 to 2001-02 period. The trend rate of growth in GDP (agricultural) declined from
4.2 per cent during the 1991-92 to 1996-97 period, to 2.2 per cent during the 1996-97 to 2001-
02 period.
However, the decline in sales of commercial vehicles does not imply that the industry has reached
a saturation level, which is evident from the significantly low penetration levels of commercial vehicles
in India. In end March 2002, the estimated penetration of commercial vehicles per thousand persons
was significantly lower at 2.4 times, as compared with an average penetration of over 30 times in
the developed countries.
Demand for commercial vehicles Figure 3.1

Demand
('000 nos)
250 236
216
200 181
171
147 150 150
138 140 144
150 136
125 119
116
110
100 99
100
50
0
1985-86 1987-88 1989-90 1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02
Source: CRIS INFAC
42 CRIS INFAC COMMERCIAL VEHICLES ANNUAL REVIEW: SEPTEMBER 2002, 164 PAGES
GDP growth versus demand for CVs Figure 3.2
Demand for CVs Growth in GDP
('000 vehicles) (per cent)
260 30
240 25
220 20
15
200
10
180
5
160
0
140
-5
120 -10
100 -15
80 -20
1985-86 1987-88 1989-90 1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02
Demand for commercial vehicles

Growth in aggrgate GDP (industrial) and GDP (agricultural with 1 year lag)
Source: CRIS INFAC
The growth in demand for commercial vehicles is significantly volatile in nature. During the 1970-
71 to 2001-02 period, the annual growth in demand for commercial vehicles has varied from negative
36 per cent to 43 per cent, with a high standard deviation of 15.3 per cent. (The trend growth
in demand for commercial vehicles during this period has been estimated at 5.7 per cent per annum.)
The volatility in demand growth for commercial vehicles is attributed to the very high sensitivity of
demand for commercial vehicles to industrial production and economic growth. This implies that small
changes in growth in industrial production and economic growth would result in significant changes
in demand for commercial vehicles.
Annual growth rate in demand for CVs Figure 3.3

Demand growth
(per cent)
50
40
30
20
10
-10
-20
-30
Trend growth rate = 5.7 per cent
-40
-50
1971-72 1975-76 1979-80 1983-84 1987-88 1991-92 1995-96 1999-2000
Source: CRIS INFAC
Note
In the following sections, passenger vehicles in the M&HCV segment are termed as buses, and those
in the LCV segment are included in goods vehicles.
Light commercial vehicles
Till 1996-97, sales of light commercial vehicles increased significantly, due to the high demand for
lower tonnage vehicles for transportation of goods over shorter distances. However, in the subsequent
years, there was a slow-down in the growth in sales of LCVs. The trend growth rate in sales of
LCVs declined from 13.6 per cent during the 1991-92 to 1996-97 period to negative 4.9 per cent
during the 1996-97 to 2001-02 period. The slow down in the sales of LCVs was driven by the decline
in the growth of production of consumer goods and the increasing preference for the higher tonnage
vehicles.
During the 1997-98 to 2001-02 period, sales of LCVs of less than 6 tonnes GVW declined at a trend
rate of 2.4 per cent, while sales of LCVs of 6-7.5 tonnes GVW increased at a trend rate of 7.3
per cent. Sales of LCVs of 6-7.5 tonne GVW increased, due to increasing preference for higher tonnage
vehicles.
Demand for LCVs Figure 3.4

Demand for LCVs
('000 nos.)
100
88
90 85
80 76
70
70 63
60
60 56 56 55
53
48 50 50
45 46
50
37 39
40
30
20
10
0
1985-86 1987-88 1989-90 1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02
Source: CRIS INFAC
Medium and heavy commercial vehicles (M&HCVs)

Based on the GVW, medium and heavy commercial vehicles are categorised as intermediate commercial
vehicles (ICVs) with 7.5-9 tonnes GVW, medium commercial vehicles (MCVs) with 9-16 tonnes GVW,
multi-axle vehicles (MAVs) with 16-25 tonnes GVW, and tractor trailers with over 25 tonnes GVW.
During the 1997-98 to 2001-02 period, the demand for ICVs increased at a trend growth rate of
12.9 per cent. The demand for ICVs has been increasing continuously, as a significant part of demand
for LCVs shifted to ICVs, due to higher profitability of operating ICVs for the transporters.
During the same period, demand for MCVs declined significantly at the trend rate of 15.4 per cent.
Demand for MCVs shifted largely to MAVs and tractor trailers, due to higher profitability as compared
with that for MCVs. The increasing preference for higher tonnage vehicles has resulted in the high
trend growth rates of 76.9 per cent in demand for MAVs during the 1997-98 to 2001-02 period.
During the same period, demand for tractor trailers increased at the trend growth rate of 20.7 per
cent.
Demand for M&HCVs (Goods vehicles) Figure 3.5
Demand for M&HCVs
('000 nos.)
140
123
120
102
100
84
80 75
66 69
65 64
57 59 59
60 52 53
43 44 44
38
40
20
0
1985-86 1987-88 1989-90 1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02
Source: CRIS INFAC
Buses
Demand for buses is mainly from state transport undertakings, municipal corporations, government bodies
and the private sector. During the 1997-98 to 2001-02 period, demand for buses declined at the
trend rate of 5.8 per cent. Demand for buses declined, due to the decline in the profitability of
state transport undertakings (STUs). The buses held by the STUs are estimated to account for around
25-28 per cent of the total population of buses.
Demand for buses Figure 3.6

Demand for buses
('000 nos.)
40
35
29
30 28 28 28
26 27
25 24
24
25
21 22 21 22
20 20 20
19
20
15
10
0
1985-86 1987-88 1989-90 1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02
Source: CRIS INFAC
Categorywise share in demand for
goods vehicles Figure 3.7
Share in demand
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1990-91 1992-93 1994-95 1996-97 1998-99 2000-01
LCVs (less than 6 T) LCVs (6-7.5 T) ICVs (7.5-9 T)

MCVs (9-16 T) MAVs (16-25 T) Tractor Trailer
Source: CRIS INFAC
Historical demand drivers

Dependence on industrial and agricultural production
The transportation activity is significantly driven by industrial and agricultural production. The correlation
between GDP (industrial) and freight movement (measured in terms of billion tonnes-km (BTKM)),
and GDP (agricultural with 1 year lag) and freight movement is significantly high at 0.9913 times
and 0.9910 times respectively during the 1971-72 to 2001-02 period. However, the elasticity of BTKM
with GDP is estimated to have gradually declined from 1.5 times during the 1981-82 to 1991-92
period to 0.95 times during the 1991-92 to 2001-02 period. During the 1991-92 to 2001-02 period,
the total freight movement increased at the trend growth rate of 4.6 per cent, in line with the trend
growth of 4.7 per cent in the industrial and agricultural GDP. Further, when the GDP (industrial and
agriculture) growth declined from 7.8 per cent in 1996-97 to 4.8 per cent in 1997-98, demand for
commercial vehicles declined by 36.5 per cent in 1997-98. Similarly, when the GDP (industrial and
agriculture) growth declined from 3.1 per cent in 1999-2000 to 2.6 per cent in 2000-01, demand
for commercial vehicles declined by 11.9 per cent in 2000-01.
In the past, there has been a continuous shift of freight movement from railways to road. However,
in the past 2-3 years, the shift to road transportation has become gradual, due to the lower railway
freight rates. The share of road transportation in total BTKM is estimated to have increased from 34.5
per cent in 1970-71 to around 63 per cent in 2001-02. The significant increase in share of road
transportation was driven by growth in road infrastructure.
Total freight movement and economic activity Figure 3.8
Growth rate
(per cent)
20
15
10
-5
-10
-15
1972-73 1976-77 1980-81 1984-85 1988-89 1992-93 1996-97 2000-01
YoY growth in total freight movement

YoY growth in GDP industrial and GDP agricultural (1 year lag)
Source: CRIS INFAC
Freight movement: Share of rail and road Table 3.1

Freight movement (BTKM) Share (per cent)
Rail Road Rail Road
1950-51 44 6 88.0 12.0
1960-61 88 35 71.5 28.5
1970-71 111 58 65.5 34.5
1980-81 148 91 61.9 38.1
1985-86 197 184 51.6 48.4
000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
1990-91
1994-95
236
250
268
346
46.8
41.9
53.2
58.1
1995-96 270 388 41.1 58.9
1996-97 278 412 40.2 59.8
1997-98 284 438 39.4 60.6
1998-99 281 449 38.5 61.5
1999-2000 302 488 38.2 61.8
2000-01 312 510 38.0 62.0
2001-02 307 522 37.0 63.0
BTKM: Billion tonnes kilometres
Notes
1) The figures of freight movement by rail, from 1970-71 to 1999-2000, are sourced from
Indian Railways.
2) All other figures are estimates.
Source: Indian Railways, CRIS INFAC
Although the differential between truck freight rates and railway freight rates is high, the share of
road in total freight movement has increased significantly. In the past, the differential between truck
freight rates and railway freight rates has declined gradually. (During the April-May 2002 period, the
effective freight rate by road at Rs 1.16 per tonne-km, was higher by around 16 per cent, as compared
with the railway freight rate of Re 1 per tonne-km.) The increase in share of road in total freight
movement is attributed to the inherent advantages of transportation by road over that by railways.
Some of the disadvantages of transportation by railways include
lack of flexibility with the transportation companies in terms of gathering and organising freight on various
routes
fixed schedule of goods transportation service of the railways
limited number of trips between various routes
increase in freight cost for point-to-point delivery of goods by railways, due to additional freight cost for intra-
city or inter-city transportation of goods
increase in transportation cost due to higher number of loading and unloading
higher risk of handling loss, due to higher number of loading and unloading.
Freight rates: Railways versus road Table 3.2

(Rs/tonne) 2001-02 Apr-May 2002
Road Railway Difference1 Road Railway Difference1
(per cent) (per cent)
Distance (Mumbai-Delhi) km 1,407 1,389 - 1,407 1,389 -
Average freight rate Rs per tonne 1,395 805 73.2 1,383 798 73.2
Loadings/unloadings in truck nos. 2 4 - 2 4 -
Loadings/unloadings in railway nos. 0 2 - 0 2 -
Loading/unloading charges for truck Rs per tonne 90 90 - 100 100 -
Loading/unloading charges for railway Rs per tonne 0 50 - 0 50 -
Handling loss per loading/unloading per cent 2 2 - 2 2 -
Effective freight cost Rs per tonne 1,631 1,362 19.7 1,638 1,394 17.5
Effective freight cost Rs per tkm 1.16 0.98 18.2 1.16 1.00 16.0
1
Percentage differential between road and rail freight rates over rail freight rates.
Note
1) Road freight rate is the average frieght rate on the Mumbai-Delhi route.
2) Railway freight rate is for the distance slab of 1,400 km.
Source: Railway Budget 2002-03, Industry
Growth of population and urbanisation

Demand for buses is driven by the growth of population and urbanisation. During the 1960-61 to
1970-71 period, total passenger traffic doubled every 10 years. However, since then the growth has
been faster and passenger traffic has doubled in approximately 7-8 years. The passenger traffic (measured
in billion passenger kilometers (BPKM)) per vehicle has increased from 4,086 BPKM per thousand buses
in 1990-91 to 7,565 BPKM per thousand vehicles in 2001-02. The increase in passenger traffic per
vehicle is attributed to lower growth in supply of buses, as compared with the increase in passenger
traffic. During the 1991-92 to 2001-02 period, the trend growth in population of buses was significantly
lower at 2.9 per cent, as compared with the 10.3 per cent growth in passenger traffic by road.
However, the increase in urban population at a CAGR of 2.8 per cent, from 217 million in 1991
to 285 million in 2001, has resulted in higher demand for buses for mass transportation systems.
Buses: Demand Table 3.3
Population Demand for buses Annual growth (per cent)
(million) (nos) Population Buses
1970-71 548 9,941 - -
1980-81 683 16,517 2.2 5.2
1990-91 846 20,258 2.2 2.1
1993-94 900 23,925 3.1 8.7
1994-95 916 29,284 1.8 22.4
1995-96 934 26,468 2.0 -9.6
1996-97 950 28,081 1.7 6.1
1997-98 966 28,109 1.7 0.1
1998-99 981 24,467 1.6 -13.0
1999-2000 997 27,144 1.6 10.9
2000-01 1,012 28,032 1.6 3.3
2001-02 1,028 19,504 1.5 -30.4
CAGR (per cent)
1970-71 to 2001-02 2.0 2.2 - -
1980-81 to 2001-02 2.0 0.8 - -
1990-91 to 2001-02 1.8 0.1 - -
Source: SIAM, CSO
Growth in road and railway network

During the 1970-71 to 2001-02 period, the trend growth rate in road transportation of goods and
passengers has been estimated at 8.2 per cent and 9.6 per cent respectively. During the same period,
the estimated vehicle population of goods vehicles has increased by 6.2 times and that of passenger
vehicles has increased by 3 times.
The road infrastructure has increased rapidly, as compared with the growth in the railway infrastructure.
During the 1970-71 to 2001-02 period, the total length of highways (including state and national highways)
increased by over 3 times (from 715,000 km in 1970-71). The national and state highways network
is about 6-7 per cent of total road network; however, they carry 70-80 per cent of total road traffic.
In end March 2002, national highways constituted only 1.8 per cent of the total road length in India,
though it carried nearly 40 per cent of the total traffic by road. During this period, the running
track length of railway network increased from 71,700 km in 1970-71 to 81,500 km in 1998-99.
Rail versus road infrastructure Table 3.4
Network ('000 km) Annualised growth (per cent)
1 2
Rail Road Rail Road
1970-71 71.7 80.6 - -
1980-81 75.9 126.0 0.6 4.6
1985-86 77.2 132.5 0.3 1.0
1990-91 78.6 161.0 0.4 4.0
1994-95 79.5 168.3 0.3 1.1
1995-96 80.4 169.7 1.2 0.8
1996-97 80.8 172.0 0.4 1.3
1997-98 80.9 n.a. 0.2 -
1998-99 81.5 n.a. 0.7 -
CAGR (1970-71 to 1996-97) 0.5 3.0
CAGR: Compunded annual growth rate
n.a.: Not available
1
Length of running track
2
Length of national and state highways
Source: Indian Railway, Ministry of Surface Transport
Impact of diesel prices

Increase in diesel prices reduces the operating margins of fleet operators. The demand for commercial
vehicles would not be affected if the truck operator is able to pass on the increase in cost in the
form of higher freight rates. However, truck operators have to keep their freight rates competitive
with railway freight rates, which are lower as compared with the truck freight rates. In the past,
the truck operators have absorbed the small changes in diesel prices. During the recessionary period,
the truck operators were not able to increase freight costs, which resulted in lower profitability. The
increase in diesel prices has affected the demand for commercial vehicles, due to the decline in profitability
of truck operators.
Fuel prices versus demand for

Diesel price Demand for goods
(Rs/litre) vehicles ('000 nos.)
20 29
18
24
16
14 19
12 14
10
9
8
6 4
Jan 1996 Jan 1997 Jan 1998 Jan 1999 Jan 2000 Jan 2001 Jan 2002
Average diesel price in Delhi and Mumbai Demand for goods vehicles
Source: CRIS INFAC
Market segments Box 3.1
Truck operators
The transportation sector is broadly classified into truck operators, small fleet operators and large fleet operators segments.
The truck operators segment includes single truck operators (own up to 1-5 trucks) and small fleet operators. This
segment accounts for over 70 per cent of total commercial vehicles sales. Single truck operators account for about 77 per
cent of the population of vehicles in the transportation sector. The number of vehicles owned and plied by the large fleet
operators, especially on longer routes, is a small proportion as compared with the total vehicles plied by the truck
operators segment. The number of truck operators in India is about 200,000. Most of them are small, proprietary firms.
The large number of operators is a result of low capital requirements, easy availability of trucks on credit, ease of obtaining
driving licenses and transport permits, and the easy availability of freight.
Fleet operators
Fleet operators are the larger, organised players in the transportation sector. In general, a fleet operator owns a number
of vehicles with varying payloads. Historically, the fleet comprised vehicles in the M&HCV segment, though, at present, it
also includes LCVs. Fleet operators account for about 25-30 per cent of LCV sales. They use vehicles primarily for goods
transportation. In general, the fleet operators have distribution points/warehouses outside the city limits. The larger/bulk
loads are transported over long distances using M&HCVs. These vehicles operate between warehouses of corresponding
regions. The load brought into the warehouse is broken into smaller consignments and distributed within the city or
adjoining towns by the smaller LCVs. LCVs pick up goods from different locations, bring them to a distribution point from
where they are loaded onto HCVs for further long distance transportation. This system improves an operator’s ability to
service clients, and also the overall fleet utilisation rate.
Private bus operators

The number of private bus operators has increased primarily, as passenger loads have been increasing and state
transport undertakings have not been able to meet the demand. A relatively large proportion of passenger movement is
met by this segment. The small scale of operation gives such operators the flexibility to ply on only the economical routes,
where there is high passenger traffic and the supply of buses by STUs is low.
Companies and non-governmental institutions

This segment accounts for a small proportion of commercial vehicle sales. This segment usually purchases light commercial
vehicles for passenger and intra-city goods transportation. In case of long distance transportation of goods, they enter
into long-term contracts with the transportation companies. Passenger vehicles are usually bought by companies which
have their office/manufacturing facilities in the outskirts of a city, primarily for employee transportation.
Government organisations/bodies
These include municipal authorities, state transport undertakings, post and telegraph departments, government hospitals,
airports, nationalised banks, state tourism development corporations, public sector undertakings, and police departments.
In general, these bodies purchase LCVs for use as passenger and special application vehicles. They comprise about 15
per cent of total LCV sales. All the LCV manufacturers enter into contracts for purchases made by the Government at the
rate specified by Directorate General of Supplies and Disposals. Buses are primarily purchased by the state transport
undertakings. State transport undertakings purchases have been showing a slow and steady growth of about 3 per cent
per annum. There are about 55 state transport undertakings in India. However, 17 state transport undertakings account
for 83 per cent of the total STU fleet, making it a highly centralised market, with few large buyers. As a result, producers
attempt to maintain price parity in their sales to this segment.
Transportation sector Box 3.2
Structure of the transportation sector

The major entities involved in the operations of the transportation industry include the truck owner, the broker/agent/
supplier, and the transportation company.
Truck owner: The small truck owners (also called single truck operators) dominate the transportation sector. The single
truck operators own up to 5 trucks. Around 77 per cent of the truck population is owned by the single truck operators. In
certain cases, the single truck operator is both, the owner and the driver of the truck. Further, the single truck operator,
with 4-5 trucks, operates trucks through his family members. Around 6 per cent of the trucks are owned by the transporters
with a fleet of more than 20 trucks, who are called fleet operators.
Transportation sector: Truck ownership Table 3.5

(per cent)
Operators own up to 5 trucks 77
Operators own 6 to 10 trucks 10
Operators own more than 20 trucks 6
Total 100
Source: Central Institute of Road Transport survey (1998)
Broker: The broker or agent or supplier is the intermediary between the transport company and the truck owner. The
broker arranges the fleet for the required number of trucks for the transportation company. The transportation company
pays the commission to the broker for the hired number of trucks. (For instance, the commission for a 9 tonnes payload
truck is around Rs 300-400 for the Mumbai-Delhi route.) The small truck owners are significantly dependent on the agents
to get them business from the transportation company.
Transportation company: The transportation company transports goods from one point to another. The transportation
company has to make its own arrangements for the freight. In general, transportation company maintains the mix of own
fleet and hired fleet. There are a number of transportation companies, which mainly operate using the hired trucks.
Distribution systems adopted by transporters

Point to point distribution: The unorganised or small truck operators follow the point to point distribution system. The truck
operators do not invest in setting up their network of branches. Also, routes of truck operators are not fixed. As per the
requirement and the availability of freight at any location, the freight is gathered and delivered to the destination center.
Hub and spoke distribution: The organised transportation companies have large network of branches. These companies
have set up hubs (also called trans-shipment centres) in various states or the major cities across the country. The large
freight is gathered at the originating center from different locations. Subsequently, the freight is transported till the hubs in
the other location. Further, the large freight is divided into small consignments or parcels, which are then redistributed to
the delivery points. The transporters ply M&HCVs for the hub to hub distribution of goods and use LCVs for the redistribution
of goods to the final delivery point. The hub and spoke distribution system enables to organise the freight between various
hubs. This enables optimisation of costs and higher revenues for the transporters. The large transportation companies
are expected to increase their investments in setting up hubs across the country.
Continued...
...continued
Third party logistics: The third party transport companies are the integrated transporters. These companies provide the
entire logistics services. The transportation service is a part of logistics services. The transporters are considering
providing value added services to customers, like packaging, load pick up services, collection of payment from the
receiver of goods on behalf of the supplier and timely delivery. Recently, there has been a gradual increase in the number
of companies that outsource their logistics requirements from the third party transportation companies.
Operations of the transportation sector

The business operations of the transportation sector are classified into two main types, full load business and part or
parcel load business.
Full load business: In the full load business, the transporter provides the truck with the entire payload capacity. In general,
in the full load business, corporates enter into long-term contracts with transportation companies on fixed routes. The
transporter need not have godowns or warehouses to maintain the stock of goods, as the delivery of goods is on a point
to point basis. The freight rate for the entire payload capacity of the truck is fixed based on the tendering process by the
corporates.
Part or parcel load business: In the part or parcel load business, the transporter gets smaller consignments of loads. The
transporter collects the consignments and organises them over different routes. The collection of load is such that the
truck can optimally use its capacity. Freight rates are charged to customers based on volume to weight ratio of the load.
Profitability of truck operators Box 3.3
Background
Demand for commercial vehicles is significantly driven by the profitability of truck operators. Capacity utilisation of
transporters, freight rates, diesel prices, other operating costs determine the profitability of truck operators. In general,
the truck operators increase their revenues by overloading the vehicles. During recessionary periods, overloading by
truck operators is relatively high. Further, truck operators maintain the suitable vehicle mix according to the payload
capacities of vehicles, in order to maximise their profitability, based on the freight availability, range of operations, type of
freight carried, and long term contracts with customers. Since 1998-99, preference for vehicles with higher GVW has been
increasing, due to higher profitability per vehicle.
Profitability of truck operators Chart 3.1
Overloading
Industrial
production Freight Capacity utilisation Truck
Agricultural movement of truck operators freight rates
production Profitability of
Diesel prices truck operators
Payload capacity BTKM Operating
per vehicle capacity Other running costs
costs
Population Vehicle mix
of CVs by GVW
Scrap rate Existing Sales of CVs

population
Source: Industry, CRIS INFAC
Capacity utilisation of truck operators

The average capacity utilisation of truck operators is the ratio of estimated freight movement by road (BTKM) to estimated
average BTKM capacity of the population of commercial vehicles during the year.
As per CRIS INFAC estimates, the average capacity utilisation of truck operators during the 1970-71 to 2001-02 period,
varied in the range of 40-63 per cent. Till 1984-85, the capacity utilisation level of the truck operators was less than 50 per
cent. The low level of capacity utilisation was mainly due to the faster growth in BTKM capacity (7.1 per cent), as
compared with the growth in freight movement by road (6.7 per cent). The growth in BTKM capacity was driven by the
growth in population of commercial vehicles. Lower growth in freight movement was due to higher dependence on
railways. In the total freight movement, share of road increased gradually from 34.5 per cent in 1970-71 to 46.9 per cent
in 1984-85.
Continued...
...continued
During the 1985-86 to 1993-94 period, the capacity utilisation of truck operators increased gradually to the peak level of
62.6 per cent in 1993-94. During the same period, the growth in freight movement by road was higher at 7.7 per cent, as
compared with 6.6 per cent growth in BTKM capacity. The higher growth in freight movement was driven by higher growth
in industrial and agricultural production. The trend growth in GDP (industrial and agricultural) increased from 3.2 per cent
during the 1970-71 to 1984-85 period to 4.7 per cent during the 1984-85 to 1993-94 period. Further, the share of road in
total freight movement increased significantly to 58 per cent in 1993-94, due to a significant growth in road infrastructure
and almost stagnant railway network.
Trend in freight movement of truck operators Figure 3.10

Capacity utilisation TKM per 1,000 vehicles
(per cent)
64 280
270
62
260
60 250
240
58 230
220
56
210
54 200
1985-86 1987-88 1989-90 1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02
Average capacity utilisation of truck operators Average tkm per vehicle
Source: CRIS INFAC
Subsequently, the capacity utilisation of truck operators during the 1994-95 to 2001-02 period, declined gradually to 57.2
per cent in 2001-02. In 1999-2000, capacity utilisation of truck operators improved, due to the recovery in the growth in
GDP (industrial and agricultural) in 1999-2000, after negligible growth in GDP (industrial and agricultural) in 1998-99.
However, the increase in capacity utilisation was not sustained in 2000-01 and 2001-02, due to the lower growth in GDP
(industrial and agricultural). Further, shift of freight movement from railways to road was gradual, due to lower railway
freight rates and improvement in the efficiency of railway transportation. In 2001-02, the share of road in total freight
movement is estimated to have increased gradually to 63 per cent. Also, the higher sales of muti-axle vehicles and tractor
trailers in 2000-01 and 2001-02, released additional BTKM capacity.
Economic growth versus capacity utilisation

of truck operators Figure 3.11
Growth rate Capacity utilisation
(per cent)
(per cent)
16 64
14
62
12
60
10
8 58
6 56
4
54
2
52
0
-2 50
1985-86 1987-88 1989-90 1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02
GDP (industrial and agricultural 1 year lag) growth Capacity utilisation of truck operators
Source: CRIS INFAC
continued...
...continued
Growth in freight movement and capacity

utilisation Figure 3.12
Growth in freight
Capacity utilisation
movement by road
(per cent)
(per cent)
25 65
63
20
61
15
59
10
57
5
55
0 53
1985-86 1987-88 1989-90 1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02
Growth in freight movement by road Capacity utilisation of truck operators
Source: CRIS INFAC
Freight rates and fuel prices

The changes in freight rates are mainly driven by the capacity utilisation of the truck operators, industrial and agricultural
production, and increase in diesel prices. During the 1995-96 to 1997-98 period, the freight rates (average on Mumbai-
Delhi route) declined at a CAGR of 12.1 per cent, due to the decline in capacity utilisation. During the same period, the
truck operators could not pass on the increase in fuel cost by increasing the freight rates, due to the decline in capacity
utilisation.
Subsequently, during the 1998-99 to 2001-02 period, the freight rates increased at a CAGR of 5 per cent. In 1998-99, in
spite of the marginal decline in capacity utilisation, the freight rates increased significantly by 23.2 per cent. The increase
in freight rate was mainly driven by the significant increase in fuel prices. The truck operators could pass on the increase
in fuel prices, due to an increase in growth in GDP (industrial and agricultural) in 1997-98, resulting in higher freight
availability. In 1999-2000, the freight rates continued to increase, due to an improvement in capacity utilisation of truck
operators. However, in 2000-01 and 2001-02, the growth in freight rates was marginal, due to a decline in capacity
utilisation and slow-down in industrial and agricultural production. During the 1998-99 to 2001-02 period, the truck operators
could not entirely pass on the increase in diesel prices by increasing the freight rates, as capacity utilisation was at lower levels.
Freight rates Table 3.6

Freight rate1 Fuel price2 Capacity utilisation Growth in GDP3
(Rs per tonne) (Rs per litre) (per cent) (per cent)
1995-96 1,266.7 7.4 60.0 8.4
1996-97 1,018.5 7.8 56.7 3.2
1997-98 978.3 9.2 56.1 6.5
1998-99 1,205.5 10.6 55.7 0.0
1999-2000 1,320.0 12.6 58.0 6.6
2000-01 1,376.5 17.0 58.0 2.8
2001-02 1,394.9 18.9 57.2 1.8
1
Average freight rate on Mumbai-Delhi route
2
Average diesel prices in Mumbai and Delhi
3
Year-on-year growth in aggregate of GDP (industrial) and GDP (agricultural with 1 year lag)
Note
Figures for capacity utilisation of truck operators are estimates.
Source: CRIS INFAC
continued...
...continued
Fuel price versus freight rates Figure 3.13

Freight rates Diesel prices
(Rs/tonne) (Rs/litre)
1600 21
1500 19
1400 17
1300 15
1200 13
1100 11
1000 9
900 7
800 5
Jan 1996 Jan 1997 Jan 1998 Jan 1999 Jan 2000 Jan 2001 Jan 2002
Average freight rates in Delhi and Mumbai Average diesel price in Mumbai and Delhi
Source: CRIS INFAC
Capacity utilisation of truck operators and

freight rates Figure 3.14
Freight rate Capacity utilisation
(Rs/tonne)
(per cent)
1300 61
1250
60
1200
59
1150
1100 58
1050
57
1000
56
950
900 55
1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02
Delhi to Mumbai freight rate Average capacity utilisation of truck operators
Source: CRIS INFAC
Overloading
In general, the truck operators overload their vehicles beyond the rated limits specified under the Motor Vehicles Act.
Overloading of vehicles is largely driven by freight availability, seasonal and regional pattern of industrial and agricultural
production, and efforts of the truck operators to maximise their revenues.
Operating profits
CRIS INFAC has estimated the profitability of a typical truck operator operating on the Mumbai-Delhi route. The profitability
estimates are based on the interviews with a few transportation companies. For the estimation of cost structure, the
average freight rates (Mumbai to Delhi and Delhi to Mumbai) and the average diesel prices (retail prices in Mumbai and
Delhi) have been considered. (Please refer to Annexure: Table 3.33 for detailed assumptions on estimation of cost
structure of truck operators.)
continued...
...continued
The operating profits of truck operators are significantly low, if the freight transported is at the rated payload capacity of
vehicles. Hence, transporters overload the vehicles in order to maximise the revenues and profits. In general, the truck
operators maximise their revenues by overloading based on the demand-supply, availability of freight, seasonal and
regional pattern of industrial and agricultural production at the points of orgination and destination of freight. The following
table gives the estimates of cost structure of truck operators corresponding to the representative scenario of overloading,
that is, assuming a payload of 12 tonnes for MCVs (rated payload of 9 tonnes) and 20 tonnes for MAVs (rated payload of
15 tonnes). The average operating costs of the truck operators increased continuously from Rs 620,104 per truck (Rs
0.49 per tkm) in 1995-96 to Rs 979,286 per truck (Rs 0.79 per tkm) in 2001-02. The increase in operating cost is attributed
to either a decline in freight rates or an increase in fuel price or both.
In 1996-97 and 1997-98, the operating profits of the truck operators are estimated to have declined significantly, due to a
decline in freight rates and an increase in fuel prices. During the 1998-99 to 1999-2000 period, operating profits increased
over that in 1997-98, as the truck operators passed on the increase in diesel prices. Subsequently, in 2000-01 and 2001-
02, operating profits of the truck operators declined, as the increase in diesel prices was partly offset by an increase in the
average freight rates. In 2000-01 and 2001-02, the truck operators could not pass on the increase in diesel prices due to
a decline in capacity utilisation, as a result of a slow-down in growth in industrial and agricultural production.
Truck operators: Trend in profitability Table 3.7

Average freight income Average operating costs Average operating profit
Rs/truck Rs/tkm Rs/truck Rs/tkm Rs/truck Rs/tkm
1995-96 1,146,319 0.90 620,104 0.49 526,215 0.41
1996-97 886,684 0.72 638,482 0.52 248,202 0.20
1997-98 843,792 0.70 676,805 0.56 166,986 0.14
1998-99 1,032,900 0.86 721,587 0.60 311,313 0.26
1999-2000 1,184,134 0.94 784,349 0.62 399,786 0.32
2000-01 1,235,222 0.98 917,046 0.73 318,176 0.25
2001-02 1,233,117 0.99 979,286 0.79 253,832 0.21
Notes
1) All figures are estimates for a typical truck operator on Mumbai-Delhi route.
2) The freight income, operating costs and operating profit are weighted average of revenue and cost
estimates for MCV and MAV.
3) The revenue and cost estimates are based on general degree of overloading on MCV and MAV. In the
case of MCV, the payload of 12 tonnes has been assumed. While, in the case of MAV, the payload of 20
tonnes has been assumed.
Impact of operating profits on demand for commercial vehicles

The relationship between the estimated operating profits of the truck operators and its impact on sales of goods vehicles
with a 1 year lag was analysed. During the 1995-96 to 2001-02 period, the correlation between operating profits (with a 1
year lag) and sales of goods vehicles has been estimated at 0.8253 times. During the 1995-96 to 1997-98 period, when the
operating profits of truck operators declined, the sales of goods vehicles declined in the following years. In 1999-2000, the
sales of goods vehicles increased, following increase in operating profits of truck operators in 1998-99 due to significant
increase in freight rates. In 2000-01, the decline in operating profits of truck operators resulted in a decline in sales of
goods vehicles in the same year. However, in 2001-02, in spite of the continued decline in operating profits, the sales of
goods vehicles increased. The increase in sales is attributed to the increase in replacement demand.
continued...
...continued
Profits of truck operators versus demand Figure 3.15

Operating profit per Sales of M&HCV
vehicle ('000 nos.)
(Rs '000/vehicle)
550 160
500 150
450 140
400 130
350 120
300 110
250 100
200 90
150 80
1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02
Weighted average estimated operating profit per vehicle Sales of M&HCV
Source: CRIS INFAC
Comparison between profitability of 16 tonnes vehicles and 25 tonnes vehicles

Based on the inputs from the transportation companies, CRIS INFAC compared profitability of the truck operators using
MCVs (16 tonnes vehicles) and MAVs (25 tonnes vehicles). The profitability per truck for 25 tonnes vehicles is significantly
higher, as compared with that for 16 tonnes vehicles. The profitability for 25 tonnes truck is higher, as the increase in
running and fixed costs per truck is significantly lower as compared to the increase in freight income.
In the representative scenario of overloading (payload of 12 tonnes for MCVs and 20 tonnes for MAVs), the net profit per
truck at Rs 212,984 per truck for MAVs is significantly higher, as compared with Rs 17,156 per truck for MCVs. The
operating profits of MAVs are higher as compared with those of MCVs, due to higher payload capacity. Further, the
operating profit per tonne of payload for MAVs is 33 per cent higher as compared with that of MCVs, due to the significant
saving in operating costs and the decline in fixed costs per tonne of payload.
Profitability of transporters using MCV or MAV Table 3.8

MCV (16 tonne GVW) MAV (25 tonne GVW)
PLT-9 T PLT-12 T PLT-15 T PLT-15 T PLT-20 T PLT-25 T
Cost structure (in terms of Rs/truck)
Income from operations 903,895 1,165,020 1,406,059 1,305,626 1,673,879 2,008,655
Operating costs 873,578 946,801 1,037,810 1,016,864 1,189,542 1,317,253
000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
Operating profit 30,317 218,219 368,248 288,762 484,337 691,402
Net profit -170,746 17,156 167,185 17,409 212,984 420,049
Cost structure (in terms of Paise/tkm)
Income from operations 99.1 99.1 99.1 99.1 99.1 99.1
Operating costs 95.8 80.6 73.2 77.2 70.5 65.0
Operating profit 3.3 18.6 26.0 21.9 28.7 34.1
Net profit -18.7 1.5 11.8 1.3 12.6 20.7
GVW: Gross vehicle weight; MAV: Multi-axle vehicle; MCV: Medium commercial vehicles; PLT: Payload
tonnes; T: Tonnes; tkm: Tonnes kilometer
Note
All figures are estimates for 2001-02.
Commercial vehicle financing Box 3.4
Market size and future growth

In 2001-02, the total size of the commercial vehicles financing industry has been estimated at around Rs 125 billion.
Financing of commercial vehicles comprises financing of new and used vehicles. In general, around 85-90 per cent of the
total sales of commercial vehicles are financed.
The growth in disbursals of the commercial vehicles finance companies is driven by the growth in the sales of commercial
vehicles. During the 2001-02 to 2006-07 period, the aggregate disbursals of the commercial vehicles finance companies
are expected to increase at a CAGR of 9-10 per cent, due to the higher expected growth in the demand for multi-axle
vehicles and tractor trailers.
Major players
The commercial vehicles finance companies are classified into non-banking financial institution (NBFCs), banks and
unorganised finance companies. The NBFCs have higher share in total disbursals as compared with that of the banks.
However, the share of banks in total disbursals is increasing, due to competitive interest rates offered by the private
sector banks, like ICICI and HDFC. In the total disbursals for commercial vehicles, the share of NBFCs is 55-60 per cent,
followed by banks at 15-20 per cent and the balance by the unorganised finance companies.
CV financing: Market share Table 3.9

(per cent) Share in
disbursals
NBFCs 55.3
Ashok Leyland Finance Ltd. 12.5
Citicorp 10.6
Telco Beauru of Hire Purchase 8.8
Sundaram Finance Ltd. 8.4
Kotak Mahindra Finance Ltd. 5.0
00000000000000000000000000000000000000000000000000000000000000000
Cholamandalam
Tata Finance Ltd.
5.0
5.0
Private sector banks 12.5
00000000000000000000000000000000000000000000000000000000000000000
ICICI Bank 10.6
HDFC Bank 1.9
Others 32.2
Total 100.0
Note
Source: Industry
Impact of changes in interest rates

The internal rate of return (IRR) on commercial vehicles financing has declined significantly from 18-19 per cent till 1999-
2000 to 11.5-13 per cent in 2001-02. The decline in IRR was mainly due to a decline in interest rates and increase in
competition from banks. This has resulted in a decline in net interest margins of finance companies. The banks can
operate at lower IRRs due to low cost of funds.
Continued...
...continued
In general, the single owners are not significantly affected by the changes in interest rates, as their interest outflow is less,
which can be attributed to most of their vehicles being second hand vehicles. For a large fleet operator, the impact of
changes in the interest rate is critical due to higher interest outflow. Given that the interest rates are expected to continue
to remain at lower levels, it would have a positive impact on the demand for commercial vehicles over the medium to long
term.
In 2001-02, the subventions offered by the commercial vehicles manufacturers to the finance companies declined, due to
a decline in interest rates. (Subvention is the discount offered by the commercial vehicles manufacturer to the finance
companies. Subventions vary with manufacturers and models.) Average subvention is in the range of Rs 15,000-20,000
per vehicle.
Future demand drivers
3.2
Factors affecting demand in the long-term (goods vehicle segment)

Growth expectations in the transportation activity
During the 2001-02 to 2006-07, the freight movement (total BTKM) is expected to increase at a
CAGR of 4.2 per cent. The total freight movement is expected to increase from 829 BTKM in 2001-
02 to 1,021 BTKM in 2006-07. The growth in freight movement would be driven by the expected
growth in industrial and agricultural production. During the 2001-02 to 2006-07 period, the growth
in GDP (industrial) is expected to increase at the CAGR of 5.6 per cent, in line with the expected
economic growth. During the same period, the growth in GDP (agricultural) is expected to continue
at its long-term trend growth rate of 2.9 per cent per annum.
Projected total freight movement Figure 3.16

Total freight
movement (BTKM)
1,200
1,100
1,021
1,000 977
936
896
900 863
822 829
800
700
600
500
2000-01 E 2001-02 E 2002-03 F 2003-04 F 2004-05 E 2005-06 E 2006-07 E
E: Estimate; F: Forecast
Source: CRIS INFAC
Expected growth in road network and its impact

An increase in road network will help to ease the heavy traffic bottlenecks. Truck operators could
experience operational difficulties mainly due to poor road conditions and higher traffic congestion,
which could result in lower revenues and higher logistics costs. All these factors result in an increase
in the average lead-time taken to transport goods.
The significant investments by the Government in projects, like the Golden Quadrilateral and the North-
South-East-West corridor would result in improved turn-around time for the road transport service sector,
due to an increase in average speed. During the 2004-05 to 2006-07 period, the turn-around time
for a Mumbai-Delhi trip is estimated to improve by 20-22 per cent, due to the expected improvement
in road infrastructure. The average distance per day, for a typical truck operator, is expected to improve
by around 25 per cent, as higher average speed can be achieved as a result of an improvement
in road condition and decline in time lost in the traffic congestion. This is also expected to result
in an increase in share of road in total freight movement. By 2006-07, share of road in total freight
movement is expected to increase to 70 per cent.
Further, in the Auto Policy 2002, the Government has proposed allowing private sector participation
in the construction and maintenance of roads, in order to improve road infrastructure. The Government
would also encourage the development of multi-modal transport and mass rapid transport systems.
Road infrastructure: New projects Table 3.10

Total length (km) Expected date of
Total Completed1 Under Planned2 completion
implementation
Golden Quaderilateral project 5,846 1,074 4,688 84 Dec 2003
NSEW Corridor project 7,300 773 715 5,812 Dec 2007
Port connetcivity projects 363 34 133 196 Dec 2004
Other national highway projects 653 85 230 338 Dec 2004
NSEW: North-South-East-West
1
As on June 1, 2002
2
Part of the total length, the contracts for which is yet to be awarded
Source: National Highways Autority of India
Expected changes in profitability of transporters

Capacity utilisation of truck operators
During the 2002-03 to 2004-05 period, the average capacity utilisation of truck operators is expected
to decline gradually. The decline in capacity utilisation would be driven by higher growth in BTKM
capacity, as compared with that in the expected freight movement by road. The increase in BTKM
capacity would be driven by the expected increase in replacement demand for commercial vehicles,
following the slow-down in demand during the 2000-01 to 2001-02 period. The replacement demand
would be largely corresponding to high level of sales of commercial vehicles during the 1995-96 to
1996-97 period. (In general, fleet operators replace their vehicles after 4-5 years.) In addition, higher
expected demand growth for multi-axle vehicles and tractor trailers would result in higher increase
in BTKM capacity.
During the 2005-06 to 2006-07 period, the average capacity utilisation of truck operators is expected
to increase, due to higher increase in freight movement by road, as compared with that in BTKM
capacity. The growth in BTKM capacity of truck operators is expected to decline, following the higher
increase in BTKM capacity during the 2002-03 to 2004-05 period. The growth in freight movement
by road would be driven by an increase in the share of road in total freight movement, due to
the commissioning of road projects (Golden Quadrilateral, NSEW Corridor and other highway projects).
Although commissioning of road projects would release additional BTKM capacity, the increase in share
of road in total freight movement is expected to be much higher as compared with that in additional
BTKM capacity. In addition, the expected decline in truck freight rates, which would reduce the differential
between railway and truck freight rates, would result in a faster increase in the share of road in
total freight movement.
Truck operators: Future capacity utilisation Table 3.11
(per cent) Average capacity
utilisation
2000-01 E 58.0
2001-02 E 57.2
2002-03 F 56.6
2003-04 F 55.6
2004-05 F 53.5
2005-06 F 54.2
2006-07 F 54.7
Source: CRIS INFAC
Freight rates and operating costs

During the 2002-03 to 2006-07 period, the truck freight rates are expected to decline continuously.
The decline in freight rates during the 2002-03 to 2004-05 period, would be driven by the expected
decline in capacity utilisation of truck operators and higher competition among the truck operators.
During the 2005-06 to 2006-07 period, the decline in freight rates would be driven by an expected
increase in competition, decline in existing high margins for MAVs and tractor trailers, and economies
of scale achieved as a result of faster turn-around time.
The freight rates could increase significantly, following the imposition of terminal life regulation. The
imposition of terminal life regulation would require the truck operators to scrap vehicles exceeding
the specified life, for instance 15 years, which would result in a significant increase in capacity utilisation
of the truck operators, as a result of shortage of fleet for transportation of goods. However, mandatory
scrapping of vehicles exceeding specified life would be difficult to implement. (In the past, the Motor
Vehicles Act 1986 had specified the scrapping of vehicles, which are over 20 years old. The truck
operators opposed the implementation of such regulation and the Government withdrew it subsequently.)
Further, the operations of single truck operators would be adversely affected following the imposition
of terminal life regulation.
During the 2002-03 to 2006-07 period, fuel prices are not expected to increase significantly, as, in
the long term, the crude oil prices are expected to be in the range of $22-25 per barrel. (In end
March 2002, the crude oil prices were at $ 25 per barrel.)
During the 2002-03 to 2006-07 period, the operating costs per truck are not expected to increase
significantly, due to expected stable fuel prices. The operating costs per tkm during the 2002-03 to
2003-04 are expected to increase, due to an increase in fuel prices during the April-June 2002 period.
In the representative scenario of overloading, the average operating cost is forecasted to decline from
Rs 0.79 per tkm in 2001-02 to around Rs 0.72 per tkm in 2006-07. The decline in operating costs
per tkm during the 2004-05 to 2006-07 period, would be driven by an increase in annual freight
movement (tkm) per vehicle. The annual freight movement is expected to increase due to the expected
improvement in turn-around time, as a result of commissioning of road development projects. The
truck operators are expected to pass on the decline in operating costs per tkm, in terms of lower
freight rates.
The decline in truck freight rates during the 2002-03 to 2006-07 period, is expected to reduce the
differential between the rail and truck freight rates. The differential between effective freight rates
by road and rail is expected to decline from Rs 0.18 tkm in 2001-02 to around Rs 0.03-0.05 per
tkm in 2006-07. The significant decline in differential between road and rail freight rates is expected
to increase the share of road in total freight movement during the 2004-05 and 2006-07 period. By
2006-07, the share of road in total freight movement is expected to increase to 70 per cent.
Truck operators: Future operating costs Table 3.12

Average operating costs
Scenario I Scenario II Scenario III
Rs/truck Rs/tkm Rs/truck Rs/tkm Rs/truck Rs/tkm
2000-01 E 837,275 0.85 917,046 0.73 1,008,771 0.66
2001-02 E 892,753 0.92 979,286 0.79 1,075,206 0.72
2002-03 F 923,946 0.94 1,011,595 0.80 1,105,427 0.73
2003-04 F 932,024 0.94 1,022,416 0.80 1,117,212 0.73
2004-05 F 980,999 0.89 1,084,891 0.77 1,198,441 0.70
2005-06 F 975,421 0.86 1,088,196 0.74 1,198,265 0.68
2006-07 F 976,494 0.82 1,098,100 0.72 1,212,494 0.66
MAV: Multi-axle vehicle; MCV: Medium commercial vehicle
Scenario I: Rated payload of 9 tonnes for MCVs and 15 tonnes for MAVs
Scenario II: Payload of 12 tonnes for MCVs and 20 tonnes for MAVs
Scenario III: Payload of 15 tonnes for MCVs and 25 tonnes for MAVs
Note
Average operating cost has been estimated as weighted average operating cost for
MCV and MAV.
Source: CRIS INFAC
Operating profits of truck operators

During the 2002-03 to 2006-07 period, the profitability of truck operators is expected to remain under
pressure, as the rate of decline in freight rates is expected to be higher as compared to the rate
of decline in operating costs of truck operators. The decline in profitability of truck operator would
result in slower growth in demand for commercial vehicles. However, if the terminal life regulation
is enforced, the profitability of truck operators may increase due to an increase in freight rates. This
would, in turn, result in a very high growth in demand for commercial vehicles.
Government policies
In March 2002, the new Auto Policy was passed by the cabinet committee of the Central Government.
The policy is yet to be passed by the parliament. The auto policy includes regulatory policy, research
and development policy and environmental policy.
The impact of the Auto Policy 2002 on the commercial vehicles industry includes
The demand for new vehicles would increase significantly in the medium term, if the provisions, such as a
terminal life policy for commercial vehicles and the linking of road tax to the age of the vehicle (in order to
discourage old commercial vehicles from plying on road) are implemented. In the past, the Government has
not been successful in the enforcement of terminal life regulation. Given that the profitability of the truck
operators has declined significantly, the enforcement of terminal life regulation would adversely affect small
truck operators. The terminal life regulation could result in significant increase in overloading by the truck
operators.
The commercial vehicle manufacturers could benefit by the proposed 16 per cent excise duty on independent
body builders. At present, truck and bus bodies built by independent body builders are exempt from excise
duty. However, bodies built by commercial vehicle manufacturers are levied a 16 per cent excise duty. If the
excise duty of 16 per cent is levied on independent body builders, the volumes of completely built buses sold
by commercial vehicle manufacturers could increase.
Increasing preference for higher tonnage vehicles

In the future, the truck operators would continue to prefer higher tonnage vehicles, due to higher
profitability per truck. During the 2002-03 to 2006-07 period, demand for LCVs is likely to slow-
down, due to the increasing preference of truck operators for ICVs over LCVs. During the same period,
the demand for MCVs is likely to decline, due to the expected increase in demand for multi-axle
vehicles and tractor trailers over MCVs. This would result in a gradual increase in the share of M&HCVs
in total BTKM capacity of goods vehicles.
Categorywise share in demand for

100%
80%
60%
40%
20%
0%
2000-01 E 2001-02 E 2002-03 F 2003-04 F 2004-05 F 2005-06 F 2006-07 F

Source: CRIS INFAC
Categorywise share in population of

100%
80%
60%
40%
20%
0%
2000-01 E 2001-02 E 2002-03 F 2003-04 F 2004-05 F 2005-06 F 2006-07 F

Source: CRIS INFAC
Categorywise share in BTKM capacity of
truck operators Figure 3.19
100%
80%
60%
40%
20%
0%
2000-01 E 2001-02 E 2002-03 F 2003-04 F 2004-05 F 2005-06 F 2006-07 F

Source: CRIS INFAC
Changes in the distribution system of truck operators

Over the medium term, the large transportation companies are expected to increase their investments
in setting up hubs across the country. Transporters ply medium and heavy commercial vehicles for
the hub to hub distribution of goods and use light commercial vehicles for the redistribution of goods
to the final delivery points. The hub and spoke distribution system enables to organise the freight
between various hubs. Given this, the costs are optimised and the transporters could earn higher revenues.
The gradual adoption of hub and spoke distribution system by the transportation companies would
result in higher demand for LCVs in the long term (over the next 5-10 years). (At present, LCVs
are largely used for transportation over shorter distances.) In the hub and spoke distribution system,
LCVs would be used for the redistribution of consignments or parcels gathered at hubs located in
major cities to the final delivery points.
Purchase of commercial vehicle Box 3.5
Choice of commercial vehicles

Aggregate demand for freight and passenger transportation translates into total demand for commercial vehicles. However,
demand for commercial vehicles of different GVW mainly depends upon choices by fleet operators and owners (who
account for nearly 60 per cent of demand for all commercial vehicles). These operators make their choices on the basis
of the following factors
Range of operations: Lighter or lower tonnage commercial vehicles are preferred for intra-city transport due to their
operational flexibility and maneuverability; conversely, heavier or higher tonnage commercial vehicles dominate long
distance transport due to higher km run per day, and lower fuel consumption. In general, newer commercial vehicles are
preferred for long distance transport, in order to reduce the maintenance costs and the risk of break-downs and accidents.
In India, larger fleet operators tend to use a vehicle for about 4-5 years, repay their loans, claim depreciation on the
vehicles, and sell these vehicles to small truck operators.
Type of goods carried: Lower tonnage commercial vehicles are preferred for higher volume-lower weight goods, such as
consumer non-durables and durables, which occupy more cubic area. (However, a fleet operator may prefer to load such
goods on a heavier commercial vehicle if the goods are to be transported over longer distances because of the latter’s
higher km run per day.)
Tripwise earning: The key criterion for choosing the vehicle to be used on a trip will be the earning from that trip, which will
depend on freight rates (which vary widely per day per trip), availability of vehicles, and the contractual obligations of the
fleet operator. Most fleet operators attempt to maximise their earnings by using heavier vehicles between major centres
and using lighter vehicles for transporting within or around those centres or fixing up contracts for instance, half a
vehicle’s loading capacity and carrying freight from the spot market for the balance capacity, which lowers per trip fixed
costs.
Choice of brand within a category

Buyers choose to buy specific models or brands within a particular tonnage category on the basis of a number of criteria,
which enable them to benefit in terms of lower cost per payload-kilometre . These include, vehicle prices, operating costs,
which depend on factors, such as fuel efficiency and engine wear and tear, extent of over-loading , availability of spare
parts and service network, engine capacity, size of the loading platform, resale value, and availability of financing from the
producer.
Factors affecting demand in the short-term (Goods vehicles)

Industrial and agricultural production
The freight movement arising from industrial and agricultural production drives the demand for commercial
vehicles in the short term. In general, sustained growth in industrial production for 6-9 months translates
into sustained growth in sales of commercial vehicles.
Freight rates and fuel prices

The truck freight rates are highly volatile and fluctuate significantly with respect to short-term demand-
supply situation. The freight rates change with respect to the availability of freight for transportation,
availability of fleet, crop season and regional political situation. The variability in the demand-supply
situation in various locations results in different freight rates across different routes. In the past, the
truck operators have absorbed the small changes in diesel prices, resulting in a decline in the profitability
of truck operators. As a result, demand for commercial vehicles is adversely affected in the short
term. Freight rates are higher in states or towns with higher levels of industrialisation as compared
with other regions, due to greater availability of freight.
Replacement demand
In India, larger fleet operators tend to use a vehicle for about 4-5 years, repay their loans, claim
depreciation on the vehicles, and sell these vehicles to small truck operators. The vehicle is then
replaced only after 12-15 years. Thus, changes in depreciation norms have an impact on replacement
demand for commercial vehicles. In 2001-02, the Union Budget for 2001-02 offered accelerated depreciation
of 50 per cent for one year for new commercial vehicles. This factor contributed to around 20 per
cent growth in demand for M&HCVs during the January-March 2002 period over the corresponding
period of 2001.
Seasonality of demand
The seasonality in demand for commercial vehicles is similar to the seasonality in the index of industrial
production. During the 1998 to 2001 period, the correlation between the monthly sales per year of
M&HCVs and IIP was moderate in the range of 0.7-0.8 times. In general, the demand for commercial
vehicles increases in March and September every year over the previous months. The increase in
demand in March and September is mainly due to the depreciation benefits on the purchase of new
truck. Following the increase in demand in March and September, the sales of commercial vehicles
decline and stabilise at lower levels.
Seasonality in demand for goods vehicles Figure 3.20

Demand for CVs
('000 nos)
22
20
18
16
14
12
10
8
6
4
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1998 1999 2000 2001
Source: CRIS INFAC
Seasonality in index of industrial production Figure 3.21

IIP (Mining &
Manufacturing)
190
180
170
160
150
140
130
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1998 1999 2000 2001
Source: CRIS INFAC
Factors affecting demand for buses
Growth in passenger traffic
During the 2001-02 to 2006-07 period, the passenger traffic is expected to increase at a CAGR of
9 per cent. The total passenger movement is expected to increase from 3,264 billion passenger kilometers
(BPKM) in 2001-02 to 5,022 BPKM in 2006-07. The growth in passenger traffic would be driven
by the growth in population and the expected increase in urbanisation. During the 2002-03 to 2006-
07 period, the growth in passenger traffic per bus is expected to decline gradually, mainly due to
expected improvement in the efficiency of passenger transportation system, in terms of scheduling
and organising the passenger traffic on various routes and reducing turn-around time.
Projected passenger movement Figure 3.22

Passenger movement PKM per thousand
(BPKM) buses
4,369
4,500 12,000
4,008
4,000 3,664 11,000
3,350 10,000
3,500 3,059
3,000 2,790 9,000
2,545
8,000
2,500
7,000
2,000
6,000
1,500
5,000
1,000 562 599 653 4,000
449 473 498 527
500 3,000
0 2,000
2000-01 E 2001-02 E 2002-03 F 2003-04 F 2004-05 F 2005-06 F 2006-07 F
Passenger movement by road Passenger movement by rail PKM per thousand buses
Source: CRIS INFAC
Purchases of buses by the state transport undertakings and the private sector
Till 1988-89, the share of state transport undertakings in the total population of buses increased continuously
to around 40 per cent. However, subsequently, the growth in the population of buses held by the
private sector was faster as compared with that by the STUs. The slower rate in growth in fleet
of the STUs resulted in a decline in the share in total estimated population of buses on road. In
end March 2001, the population of buses held by the state transport undertakings is estimated at
31 per cent of total estimated population of buses on road. The slow-down in the growth of the
fleet of STUs was mainly due to lower profitability of the STUs.
Trend in registered buses in India Figure 3.23

Registered buses
('000 nos.)
600
500
400
300
200
100
0
1972-73 1976-77 1980-81 1984-85 1988-89 1992-93 1996-97
Registered buses with public sector Registered buses of private sector
Source: CRIS INFAC
Profitability of state transport undertakings
During the 2002-03 to 2006-07 period, the passenger tariff is expected to increase gradually. However,
the profitability of STUs would continue to remain under pressure, as the increase in costs would
be partly offset by increase in revenues.
Trend in the reported net losses of STUs Figure 3.24

(Rs billion)
18 17
16
14
12
12 11
10 9
8 7
6 5
6
0
1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99
Source: CRIS INFAC
Government policies
In March 2002, the new Auto Policy was passed by the cabinet committee of the Central Government.
The policy is yet to be passed by the parliament. The Auto Policy includes regulatory policy, research
and development policy, and environmental policy. The Supreme Court, in a bench hearing, stated
that buses in the National Capital Region, will have to ply on CNG, and that the central and state
governments would have to ensure the availability of CNG. The implementation of the order could
result in a significant increase in the replacement demand for commercial vehicles.
Demand outlook
3.3
CVs: Demand forecast aggregates Table 3.13

Demand for commercial vehicles
Volume Payload tonnage Value
(nos.) ('000 tonnes) (Rs billion)
2001-02 E 143,715 1,303 82.6
2002-03 F 157,149 1,472 93.2
2003-04 F 164,875 1,565 100.5
2004-05 F 172,623 1,681 108.9
2005-06 F 183,840 1,783 117.4
2006-07 F 192,717 1,871 125.1
CAGR (2002-03 to 2006-07) 6.0 7.5 8.7
Source: CRIS INFAC
Following the significant slow-down in the offtake of commercial vehicles in 2000-01 and 2001-02,
the upward correction in demand is expected over the medium term. During the 2001-02 to 2006-
07 period, demand for commercial vehicles is expected to increase at a CAGR of 6 per cent, to
0.19 million vehicles. (In 1996-97, the sales of commercial vehicles were highest at 0.24 million vehicles.)
During the same period, the demand for commercial vehicles, in tonnage (payload capacity) and value
terms is expected to increase at a CAGR of 7.5 per cent and 8.7 per cent respectively. The higher
growth in tonnage and value terms as compared to demand growth in the volume terms is mainly,
due to faster growth in demand for higher tonnage vehicles. (During the 2001-02 to 2006-07 period,
the prices of commercial vehicles are assumed to increase at a CAGR of 1-2.5 per cent for different
vehicle categories.)
However, if the Government imposes the terminal life regulation, demand for commercial vehicles would
increase significantly at a CAGR of 12.2 per cent, to 0.26 million vehicles during the 2001-02 to
2006-07 period.
Demand for commercial vehicles would be driven by,

the growth in total freight movement (BTKM) as a result of an increase in industrial and agricultural production
the increase in share of road in total freight movement, as a result of an increase in road network and slower
growth in railway network
profitability of truck operators
increasing preference for intermediate commercial vehicles, multi-axle vehicles and tractor trailers, due to
higher profitability per vehicle.
During the 2001-02 to 2006-07 period, the total freight movement is expected to increase at a CAGR
of 4.2 per cent, to 1,021 BTKM. The growth in freight movement would be mainly due to the
expected growth in industrial and agricultural production. During the same period, GDP (industrial) and
GDP (agricultural) are assumed to increase at a CAGR of 5.6 per cent and 2.9 per cent respectively.
The Government has significantly increased its investments in the development of road infrastructure.
Further, investments in road development projects, like Golden Quadrilateral and North-South-East-West
Corridor would have a positive impact, in terms of faster turn-around time. In addition, the slower
growth in railway network and its rigid time-bound services would result in continued shift of freight
transportation from railway to road. Also, the expected decline in truck freight rates, which would
reduce the differential between railway and truck freight rates, would result in faster increase in share
of road in total freight movement. The share of road transportation in total freight movement is expected
to increase from 63 per cent in 2001-02 to 70 per cent in 2006-07. The increase in share of road
transportation would result in the increase in the freight movement by road at a CAGR of 6.5 per
cent, from 522.4 BTKM in 2001-02 to 714.7 BTKM in 2006-07.
During the 2002-03 to 2006-07 period, truck freight rates are expected to decline continuously. The
decline in freight rates during the 2002-03 to 2004-05 period, would be driven by the expected decline
in capacity utilisation of truck operators and higher competition among the truck operators. During
the 2005-06 to 2006-07 period, the decline in freight rates would be driven by an expected increase
in competition, decline in existing high margins for MAVs and tractor trailers, and economies of scale
achieved as a result of faster turn-around time. The truck operators are expected to pass on the
decline in operating costs per tkm, in terms of lower freight rates.
During the 2002-03 to 2006-07 period, the profitability of truck operators is expected to remain under
pressure, as the rate of decline in freight rates is expected to be higher as compared to the rate
of decline in operating costs of truck operators. The decline in profitability of truck operator would
result in slower growth in demand for commercial vehicles. However, if the terminal life regulation
is enforced, the profitability of truck operators may increase as a result of an increase in freight rates.
This would in turn result in a very high growth in demand for commercial vehicles.
The profitability per vehicle is higher for higher tonnage vehicles as compared with that for lower
tonnage vehicles. Given this, the demand for intermediate commercial vehicles (7.5-9 tonnes) is expected
to increase at the cost of demand for light commercial vehicles (less than 6 tonnes GVW); whereas,
multi-axle vehicles and tractor trailers would be preferred over medium duty vehicles (16 tonnes GVW).
Commercial vehicles: Demand forecasts Table 3.14
(nos) 2000-01 E 2001-02 E 2002-03 F 2003-04 F 2004-05 F 2005-06 F 2006-07 F CAGR
(per cent)
M&HCVs 87,497 88,656 98,839 104,812 111,792 117,860 122,969 6.8
Trucks 59,465 69,152 76,496 81,165 86,203 90,778 94,516 6.4
ICVs (7.5-9 tonnes) 8,881 10,195 11,212 14,034 15,487 16,210 17,138 10.9
MCVs (9-16 tonnes) 31,202 27,778 29,525 25,638 23,279 24,038 23,542 -3.3
00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
MAVs (16-25 tonnes) 15,255 25,592 28,670 34,347 39,432 41,956 44,745 11.8
Tractor trailors 4,127 5,587 7,089 7,147 8,005 8,575 9,090 10.2
Buses 28,032 19,504 22,343 23,647 25,589 27,082 28,453 7.8
LCVs 62,916 55,059 58,310 60,063 60,831 65,980 69,748 4.8
LCVs (less than 6 tonnes) 41,417 34,661 35,659 36,548 36,811 39,966 42,176 4.0
LCVs (6-7.5 tonnes) 21,499 20,398 22,651 23,515 24,021 26,014 27,572 6.2
Total CVs 150,413 143,715 157,149 164,875 172,623 183,840 192,717 6.0
CAGR: Compounded annual growth rate; CVs: Commercial vehicles; ICVs: Intermediate commercial vehicles; LCVs:
Light commercial vehicles; MAVs: Multiaxle vehicles; MCVs: Medium commercial Vehicles; M&HCVs: Medium and
heavy commercial vehicles
Source: CRIS INFAC
Goods vehicles' demand forecasts: Sensitivity analysis Table 3.15

Parameters Unit Value of Demand for goods Change in Growth in demand
assumption vehicles (nos.) demand (per cent)
Base New Base New (per cent) Base New
2002-03
GDP growth (industrial) per cent 5.0 4.0 134,806 125,382 -7.0 8.5 0.9
GDP growth (agricultural) per cent 5.7 5.0 134,806 127,802 -5.2 8.5 2.9
0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
Share of road per cent 64.0 65.0 134,806 166,763 23.7 8.5 34.3
Average distance per day of trucks km/day 200.0 205.0 134,806 103,912 -22.9 8.5 -16.3
2006-07
GDP (industrial) per cent 5.6 4.0 164,264 140,750 -14.3 5.7 2.5
GDP (agricultural) per cent 2.9 2.0 164,264 149,741 -8.8 5.7 3.8
Share of road per cent 70.0 72.0 164,264 198,953 21.1 5.7 9.9
Average distance per day of trucks km/day 220.0 230.0 164,264 100,690 -38.7 5.7 -4.1
Notes
1) In 2002-03, growth in demand corresponds to growth over 2001-02.
2) In 2006-07, growth in demand corresponds to the CAGR during the 2001-02 to 2006-07 period.
Source: CRIS INFAC
Light commercial vehicles
During the 2001-02 to 2006-07 period, demand for LCVs is expected to increase at a CAGR of 4.8
per cent. The slower growth in demand for LCVs would be driven by the increasing preference for
ICVs over LCVs. During the same period, demand for LCVs (less than 6 tonnes GVW) is expected
to increase at 4 per cent, whereas, demand for LCVs (6-7.5 tonnes GVW) would increase at a higher
CAGR of 6.2 per cent, due to increasing preference for higher tonnage vehicles. The share of LCVs
in total BTKM capacity of goods vehicles is expected to decline gradually from 13.1 per cent in
2001-02 to 11.1 per cent in 2006-07. (Assuming that the Government imposes the terminal life regulation
of 15 years for commercial vehicles, demand for LCVs would increase significantly at a CAGR of 9.2
per cent during the 2001-02 to 2006-07 period.)
Further, the gradual adoption of hub and spoke distribution system by the transportation companies
would result in higher demand for LCVs in the long term (over the next 5-10 years). (At present,
LCVs are largely used for transportation over shorter distances.) In the hub and spoke distribution system,
LCVs would be used for the redistribution of consignments or parcels gathered at hubs located in
major cities to the final delivery points.
Medium and heavy commercial vehicles (M&HCVs)

During the 2001-02 to 2006-07 period, demand for M&HCVs is expected to increase at a CAGR of
6.8 per cent. The growth in demand for M&HCVs would be driven by the higher expected growth
in demand for ICVs, MAVs, and tractor trailers. (Assuming that the Government imposes the terminal
life regulation of 15 years for commercial vehicles, demand for M&HCVs would increase significantly
at a CAGR of 13.9 per cent during the 2001-02 to 2006-07 period.)
Goods vehicles
During the 2001-02 to 2006-07 period, demand for trucks is expected to increase at a CAGR of
6.4 per cent. Demand for trucks would be driven by the increase in industrial and agricultural production.
Further, the increasing preference of truck operators for ICVs over LCVs, and for MAVs and tractor
trailers over MCVs would result in higher demand for goods vehicles. The partial substitution of LCVs
would result in higher demand growth for ICVs at a CAGR of 10.9 per cent. Demand for MCVs
is expected to decline at a CAGR of 3.3 per cent, due to increasing preference for MAVs and tractor
trailers over MCVs. During the 2001-02 to 2006-07 period, demand for MAVs and tractor trailers is
expected to increase at a CAGR of 11.8 per cent and 10.2 per cent respectively. The share of
MAVs and tractor trailers in total BTKM capacity is expected to increase significantly from 16.8 per
cent in 2001-02 to 35.1 per cent in 2006-07.
Buses
During the 2001-02 to 2006-07 period, demand for buses is expected to increase at a CAGR of
7.8 per cent, due to the increase in passenger movement. The passenger movement is forecasted
to increase from 3,264 BPKM in 2001-02 to 5,022 BPKM in 2006-07. Further, the growth of passenger
movement per bus is expected to decline gradually, due to an expected increase in population of
buses and decline in turn-around time of the passenger transportation system.
Short-term demand outlook
In 2002-03, demand for commercial vehicles is expected to increase by 9-10 per cent over that in
2001-02. The higher expected demand for M&HCV would be partly offset by lower growth in demand
for LCVs.
In 2002-03, demand for M&HCVs is expected to increase by 11.5 per cent. The growth in demand
for M&HCVs would be driven by higher growth in demand for ICVs, MAVs and tractor trailers. The
demand for buses is expected to increase by 12-15 per cent, following the significant decline in the
sale of buses in 2001-02. The expected increase in demand for buses in 2002-03, would just partly
recover the level of demand in 2000-01.
In 2002-03, demand for LCVs is expected to increase by 5-6 per cent. The demand growth for LCVs
(6-7.5 tonnes GVW) is expected to increase at higher rate of 10-11 per cent, due to increasing preference
for higher tonnage LCVs over lower tonnage LCVs. As a result, demand for LCVs less than 6 tonnes
GVW is expected to remain stable or decline marginally.
The expected demand for commercial vehicles, in 2002-03, would be driven by

growth in industrial and agricultural production
higher replacement demand
profitability of truck operators
long-term transport contracts by corporates with transportation companies
increase in purchases of buses by STUs
increase in demand for buses in the National Capital Region.
In 2002-03, demand for commercial vehicles is expected to increase, due to the expected increase
in industrial and agricultural production. In 2002-03, the growth in GDP (industrial) is expected to
increase to around 5 per cent, as compared with 3.5 per cent growth in 2001-02. The significant
increase in growth in GDP (agricultural) from 0.2 per cent in 2000-01 to 5.7 per cent in 2001-
02, would have a positive impact on demand for commercial vehicles. Given the expected growth
in industrial and agricultural production, the total freight movement (BTKM) is expected to increase
by 4.1 per cent, to around 863 BTKM. The share of road in freight movement is expected to increase
marginally, from 63 per cent in 2001-02 to 64 per cent in 2002-03.
In general, the large fleet operators replace their vehicles after every 4-5 years. The share of goods
vehicles over the age of 5 years is estimated to have increased from 57 per cent in 1996-97 to
68 per cent in 2001-02. Further, the average age of population of commercial vehicles has been
increasing continuously, as the truck operators have postponed the replacement of older vehicles (which
at present, would largely correspond to the sales during the 1995-96 to 1996-97 period), due to the
declining profitability. This implies that there is a potential for significant increase in replacement demand
for commercial vehicles. The replacement demand for trucks has been increasing since June 2001,
and the growth is expected to continue in 2002-03.
Share of goods vehicles over the age of
5 years in population Figure 3.25
(per cent)
70
68
66
64
62
60
58
56
1989-90 1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02
Source: CRIS INFAC
The profitability of truck operators declined in 2001-02, due to the decline in freight rates and an
increase in fuel costs. The decline in profitability of truck operators in 2001-02 would have an adverse
impact on the demand for commercial vehicles. However, new long-term transport contracts (between
corporates and the transportation companies) are expected to increase in 2002-03, due to an expected
increase in industrial and agricultural production, and infrastructure development projects. As the long-
term contracts provide fixed revenues to the truck operators, they are expected to increase the purchases
of commercial vehicles.
In 2001-02, demand for buses declined significantly, as the STUs postponed their purchases due to
decline in profitability. In 2002-03, STUs are expected to purchase new buses. According to industry
sources, in early 2002-03, a few STUs have started placing orders with commercial vehicle manufacturers.
As per the hearing by Supreme Court in April 2002, buses in the national capital region will have
to ply on CNG, and the central and state governments would have to ensure the availability of CNG.
The implementation of the order is expected to result in a significant increase in the replacement
demand for buses in 2002-03.
Demand forecast methodology
3.4
This section explains CRIS INFAC’s approach for demand projection of commercial vehicles. The projections
of goods vehicles and buses have been done separately. The steps followed in demand projections
and the underlying assumptions have been discussed in detail.
Goods vehicles
Estimation of freight movement by road
The total freight movement is a function of industrial and agricultural production. The historical data
of GDP (industrial), GDP (agricultural) and estimated total freight movement during the 1985-86 to
2001-02 period have been used to forecast the future demand.
During the forecast period of 2002-03 to 2006-07, GDP (industrial) and GDP (agricultural) have been
projected separately, which have then been aggregated for forecasting the total freight movement.
During the 2001-02 to 2006-07 period, GDP (industrial) and GDP (agricultural) are assumed to increase
at a CAGR of 5.6 per cent and 2.9 per cent respectively.
Total freight movement is forecasted using the regression equation, which establishes the relationship
between the aggregate GDP (industrial and agricultural) and total freight movement. The equation is
obtained by regression of the logarithms of total freight movement with the logarithms of aggregate
GDP (industrial and agricultural) during the 1985-86 to 2001-02 period.
The freight movement by road has been forecasted based on the projected total freight movement
and expected share of road. By 2003-04, the share of road has been assumed to increase gradually
to 65 per cent. During the 2004-05 and 2006-07 period, the share of road in total freight movement
is expected to increase at a faster rate, due to expected commissioning of new highway projects,
such as Golden Quadrilateral and North-South-East-West Corridor, either partly or completely. By 2006-
07, the share of road is expected to increase to 70 per cent in total freight movement.
Estimation of historical vehicle population

Although historical data on total registered motor vehicles in India is available from the Ministry of
Surface Transport, it has not been used as population of vehicles on road. However, CRIS INFAC
has estimated the population of vehicles on road independently, in order to account for average life
of vehicle (for estimating scrap rate).
During the 1970-71 to 2001-02 period, the vehicle population has been estimated by various tonnage
categories (GVW) of vehicles. The vehicle population is estimated based on the production of different
vehicle categories, assumed terminal life of vehicles and estimated scrap rate during the 1985-86 to
2001-02 period. For M&HCVs, average terminal life has been assumed at 20 years, while for LCVs,
average terminal life has been assumed at 12 years.
Estimation of historical BTKM capacity

BTKM capacity means the capacity for freight movement corresponding to the population of vehicles
on road. BTKM capacity has been estimated for the 1970-71 to 2001-02 period, by different tonnage
categories of vehicles.
BTKM capacity is based on the volume of vehicles (corresponding to vehicle population, sales, and
scrap), average payload capacity per vehicle (corresponding to vehicle population, sales, and scrap)
and the assumption of average distance covered per annum.
BTKM capacity of the population of vehicles at the end of the year is estimated as BTKM capacity
of population of vehicles at the end of previous year plus BTKM capacity of sales of vehicles less
BTKM capacity of scrapped vehicles during the year.
The ratio of freight movement by road and the estimated BTKM capacity is the capacity utilisation
of the truck operators during the year.
Projection of future BTKM capacity

The BTKM capacity of vehicle population has been forecasted during the 2002-03 to 2006-07 period,
by tonnage category of vehicles. The required BTKM capacity of future population of vehicles is based
on the projected freight movement by road and expected capacity utilisation of truck operators.
During the 2002-03 to 2004-05 period, the capacity utilisation of truck operators is expected to decline.
The decline in capacity utilisation will be driven by significant addition of BTKM capacity as a result
of an expected increase in replacement demand. During the 2005-06 to 2006-07 period, capacity utilisation
of truck operators is likely to increase, due to higher growth in freight movement as compared with
that in BTKM capacity.
Projection of future vehicle population

The future vehicle population that is required to carry the projected freight movement by road has
been forecasted during the 2002-03 to 2006-07 period, by tonnage category of vehicles.
The population of vehicles has been forecasted based on the expected share of vehicles by tonnage
category in future BTKM capacity, expected pay load per vehicle by tonnage category, and expected
annual distance covered per vehicle.
Given that ICVs are preferred over LCVs, and MAVs and tractor trailers are preferred over MCVs, in
the future BTKM capacity, the share of LCVs and MCVs is expected to decline and the share ICVs,
MAVs, and tractor trailers is expected to increase. This would further result in an increase in payload
per vehicle. The average annual distance per vehicle is expected to increase, due to improvement
in road infrastructure and commissioning of new highways (Golden Quadrilateral and North-South-East-
West Corridor) after 2003-04.
Projection of demand for commercial vehicles

Demand for commercial vehicles during the 2002-03 to 2006-07 period, has been forecasted based
on the projected vehicle population and expected scrap rate by vehicle category.
Demand for commercial vehicles is estimated as incremental vehicle population during the 2002-03
to 2006-07 period plus expected scrapped vehicles. The expected scrapped vehicles correspond to
replacement demand.
Projection of demand, if the Government imposes terminal life regulation
It has been assumed that the Government would impose the terminal life regulation in 2004-05. The
terminal life regulation requires the truck operators to scrap vehicles exceeding a specified life (assumed
to be 15 years). Although the mandatory scrapping of vehicles exceeding specified life would be
difficult to implement, the scenario of terminal life is mainly from the point of view of understanding
the potential demand growth for commercial vehicles, if the Government imposes terminal life regulation
during the 2002-03 to 2006-07 period.
It has been assumed that the Government would impose terminal life regulation in 2004-05; however,
there would be a delay in the implementation of this regulation. Hence, significant scrapping of vehicles
is largely expected in 2005-06 and 2006-07. In end 2004-05, around 12-15 per cent vehicles of total
population of goods vehicles would be over 15 years old.
For the projection of demand for commercial vehicles in this scenario, all the aforesaid steps are repeated.
Till 2003-04, the vehicle population, BTKM capacity and demand for commercial vehicles would not
change, as there would be no terminal life regulation until such time.
Subsequently, during the 2004-05 to 2006-07 period, the BTKM capacity has been forecasted based
on the freight movement and expected capacity utilisation, due to higher scrapping of vehicles. In
2005-06 and 2006-07, the capacity utilisation of truck operators is expected to increase significantly,
as significant proportion of vehicle population is expected to be scrapped.
The population of commercial vehicles during the 2004-05 to 2006-07 period, is forecasted based on
the projected BTKM capacity, expected share of vehicles by tonnage category in BTKM capacity and
expected average payload per vehicle by tonnage category of vehicles. The share of MCVs, in BTKM
capacity, is expected to decline significantly, due to higher expected scrapping of MCVs. Demand
for commercial vehicles is estimated based on the incremental population and expected scrap rate.
Buses
A simplistic approach has been used for projecting demand for buses, as demand for buses has been
more stable as compared with that for the goods vehicles.
Projection of passenger movement by road

The total passenger movement (BPKM) is expected to increase at a CAGR of 9 per cent, from 3,264
BPKM in 2001-02 to 5,022 BPKM in 2006-07. The CAGR in total passenger movement has been
assumed at the estimated trend growth rate of 9 per cent during the 1981-82 to 2001-02 period.
The share of road in total passenger movement is expected to increase from 85.5 per cent in 2001-
02 to 87 per cent in 2006-07. The increase in share of road would result in a CAGR of 9.4 per
cent in passenger movement by road, from 2,790 BPKM in 2001-02 to 4,369 BPKM in 2006-07.
Passenger movement per bus

During the 2002-03 to 2006-07 period, the year-on-year growth in passenger movement per bus is
expected to gradually decline, due to expected increase in population of buses and improvement in
the efficiency of mass transportation system, in terms of scheduling and organising the passenger traffic
on various routes.
Projection of demand for buses
The population of buses during the 2002-03 to 2006-07 period, has been forecasted based on the
projected passenger movement and expected passenger movement per bus.
Demand for buses is estimated as incremental population of buses plus the expected scrapped vehicles.
The scrap rate has been estimated assuming the life of vehicles at 15 years.
Limitations
The estimation of historical vehicle population, BTKM capacity of commercial vehicles by different tonnage
categories are based on the assumption of average terminal life of vehicles, average pay load capacity of
vehicles by GVW. However, the actual vehicle population and BTKM capacity could differ from the estimates.
The historical data on freight movement by road is available only for a few years. (The past available data on
freight movement by road has been sourced from Indian Railways, India Infrastructure Report 2001.) The
freight movement by road has been extrapolated for the remaining period.
The impact of other factors, such as emission norms, different sales tax across states, overloading of vehicles,
changes in price of commercial vehicles, which could affect future demand for commercial vehicles, has not
been considered.
The impact of substitution by alternative modes of transport, such as coastal transport, inland waterways and
petroleum and petroleum product pipelines has not been considered.
Annexure
3.5
CVs: Production and sales Table 3.16

(nos.) Production Sales1
1990-91 141,212 138,446
1991-92 139,717 135,756
1992-93 129,152 119,422
1993-94 136,960 146,981
000000000000000000000000000000000000000000000000000000000000000000000000
1994-95 190,306 180,874
1995-96 249,300 215,699
1996-97 269,932 235,980
1997-98 165,114 149,872
1998-99 135,733 140,029
1999-2000 173,219 170,778
2000-01 152,054 150,413
2001-02 146,198 143,715
1
Sales figures include exports
Source: SIAM
M&HCVs: Production and sales Table 3.17

(nos.) Trucks Buses Total M&HCVs
Production Sales1 Production Sales1 Production Sales1
1990-91 65,710 65,012 21,121 20,258 86,831 85,270
1991-92 66,644 64,493 22,865 21,697 89,509 86,190
1992-93 52,162 44,383 27,444 25,294 79,606 69,677
1993-94 43,807 53,183 22,174 23,925 65,981 77,108
0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
1994-95 73,058 75,459 28,807 29,284 101,865 104,743
1995-96 102,348 101,626 27,388 26,468 129,736 128,094
1996-97 123,575 123,394 28,472 28,081 152,047 151,475
1997-98 66,537 65,519 29,358 28,109 95,895 93,628
1998-99 57,309 59,178 23,053 24,467 80,362 83,645
1999-2000 85,445 83,682 26,866 27,144 112,311 110,826
2000-01 59,247 59,465 28,938 28,032 88,185 87,497
2001-02 E 70,862 69,152 19,987 19,504 90,849 88,656
E: Estimate
1
Source: SIAM
LCVs: Production and sales Table 3.18
(nos.) Production Sales1
1990-91 54,381 53,176
1991-92 50,208 49,566
1992-93 49,546 49,745
1993-94 70,979 69,873
000000000000000000000000000000000000000000000000000000000000000000000
1994-95 88,441 76,131
1995-96 119,564 87,605
1996-97 117,885 84,505
1997-98 69,219 56,244
1998-99 55,371 56,384
1999-2000 60,908 59,952
2000-01 63,869 62,916
2001-02 55,349 55,059
1
Source: SIAM
Commercial vehicles: Regionwise sales Table 3.19

(nos.) North South East West Total
1991-92 27,399 33,707 13,683 36,399 111,188
1992-93 25,306 36,623 11,704 34,211 107,844
1993-94 23,044 45,610 13,046 49,682 131,382
1994-95 35,094 58,626 16,459 62,458 172,637
000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
1995-96
1996-97
47,741
60,520
75,541
77,656
22,188
30,920
87,077
102,470
232,547
271,566
1997-98 37,811 47,089 24,446 60,672 170,018
1998-99 34,075 34,820 21,794 41,182 131,871
1999-2000 43,306 45,510 23,782 51,998 164,596
2000-01 31,162 47,587 23,729 35,339 137,817
Apr-Dec 2001 22,484 27,253 12,930 26,982 89,649
Source: SIAM
Trucks: Regionwise sales Table 3.20

1991-92 14,165 12,829 8,391 18,158 53,543
1992-93 9,539 12,700 5,353 15,887 43,479
1993-94 8,881 15,740 5,495 20,251 50,367
1994-95 14,647 19,940 8,758 26,820 70,165
000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
1995-96
1996-97
19,489
25,801
28,948
29,011
11,991
17,733
33,844
44,974
94,272
117,519
1997-98 13,996 9,492 12,012 20,626 56,126
1998-99 15,980 10,845 11,332 17,723 55,880
1999-2000 23,809 16,968 14,673 24,699 80,149
2000-01 11,704 15,356 13,818 15,060 55,938
Apr-Dec 2001 10,485 10,376 8,434 14,255 43,550
Source: SIAM
Buses: Regionwise sales Table 3.21
1991-92 3,738 8,074 1,335 4,216 17,363
1992-93 6,237 6,951 1,976 4,591 19,755
1993-94 3,721 7,794 2,346 6,053 19,914
1994-95 6,148 10,227 2,095 6,724 25,194
000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
1995-96
1996-97
6,014
6,031
9,100
10,037
2,477
2,354
7,148
7,074
24,739
25,496
1997-98 5,574 11,057 2,828 6,199 25,658
1998-99 5,617 7,916 2,973 5,240 21,746
1999-2000 5,375 8,316 2,634 7,877 24,202
2000-01 7,207 10,031 2,807 4,563 24,608
Apr-Dec 2001 3,771 3,979 1,055 2,900 11,705
Source: SIAM
LCVs: Regionwise sales Table 3.22

1991-92 9,496 12,804 3,957 14,025 40,282
1992-93 9,530 16,972 4,375 13,733 44,610
1993-94 10,442 22,076 5,205 23,378 61,101
1994-95 14,299 28,459 5,606 28,914 77,278
000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
1995-96
1996-97
22,238
28,688
37,493
38,608
7,720
10,833
46,085
50,422
113,536
128,551
1997-98 18,241 26,540 9,606 33,847 88,234
1998-99 12,478 16,059 7,489 18,219 54,245
1999-2000 14,122 20,226 6,475 19,422 60,245
2000-01 12,251 22,200 7,104 15,716 57,271
Apr-Dec 2001 8,228 12,898 3,441 9,827 34,394
Source: SIAM
Goods vehicles: Payload tonne per vehicle Table 3.23

(tonne/vehicle) Trucks LCVs
1990-91 9.9 2.6
1991-92 10.0 2.7
1992-93 10.0 2.7
1993-94 10.1 2.8
10.2 2.8
00000000000000000000000000000000000000000000000000000000000000000000000000000000000000
1994-95
1995-96 10.4 2.8
1996-97 10.5 2.9
1997-98 10.5 2.9
1998-99 10.6 2.9
1999-2000 10.7 2.9
2000-01 10.8 3.0
2001-02 11.0 3.0
Notes
All figures are estimates.
Source: CRIS INFAC
Goods vehicles: Sales (Payload tonnes) Table: 3.24
('000 tonnes) Trucks LCVs Total
1990-91 660.4 151.1 811.5
1991-92 655.8 139.7 795.5
1992-93 452.5 140.9 593.3
1993-94 574.6 196.8 771.3
1994-95 804.8 217.6 1,022.3
00000000000000000000000000000000000000000000000000000000000000000000000000000000
1995-96 1,215.7 267.7 1,483.4
1996-97 1,413.9 240.8 1,654.7
1997-98 699.4 160.3 859.7
1998-99 673.0 172.6 845.7
1999-2000 1,011.3 182.1 1,193.5
2000-01 743.8 192.2 936.0
2001-02 931.4 169.2 1,100.5
Note
Source: CRIS INFAC
CVs: Population on road Table 3.25

(nos.) Trucks Buses LCVs Total CVs
1990-91 738,776 268,293 386,268 1,393,337
1991-92 781,551 276,940 415,552 1,474,043
1992-93 802,958 287,575 443,477 1,534,010
1993-94 832,536 299,305 490,063 1,621,904
1994-95 883,520 313,285 540,461 1,737,267
00000000000000000000000000000000000000000000000000000000000000000000000000000000
1995-96 959,173 325,224 599,687 1,884,084
1996-97 1,054,369 336,268 652,703 2,043,341
1997-98 1,088,892 344,526 674,675 2,108,093
1998-99 1,116,059 352,616 695,632 2,164,307
1999-2000 1,166,932 360,406 719,057 2,246,395
2000-01 1,192,092 366,297 744,216 2,302,605
2001-02 1,226,198 364,348 760,197 2,350,744
Note
Source: CRIS INFAC
Goods vehicles: Vehicle population on road Table 3.26
(nos.) LCVs (less LCVs LCVs ICVs MCV MAV Tractor Trucks CVs
than 6 T) (6-7.5 T) Total (7.5-9 T) (9-16 T) (16-25 T) trailer Total Total
1990-91 275,222 111,046 386,268 3,199 734,792 777 8 738,776 1,125,044
1991-92 293,162 122,390 415,552 4,217 775,915 1,384 34 781,551 1,197,102
1992-93 309,449 134,027 443,477 5,020 795,865 1,986 86 802,958 1,246,434
1993-94 340,818 149,245 490,063 6,125 818,775 6,882 754 832,536 1,322,599
0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
1994-95 371,977 168,485 540,461 7,921 864,053 10,206 1,340 883,520 1,423,981
1995-96 406,832 192,855 599,687 10,696 917,090 24,844 6,543 959,173 1,558,860
1996-97 437,509 215,195 652,703 17,532 986,340 38,891 11,606 1,054,369 1,707,072
1997-98 451,454 223,221 674,675 23,863 1,009,673 41,316 14,040 1,088,892 1,763,567
1998-99 465,413 230,219 695,632 30,700 1,021,022 46,970 17,368 1,116,059 1,811,691
1999-2000 480,647 238,410 719,057 40,034 1,041,974 62,333 22,591 1,166,932 1,885,989
2000-01 497,047 247,169 744,216 48,915 1,038,871 77,588 26,718 1,192,092 1,936,308
2001-02 506,217 253,980 760,197 59,110 1,031,604 103,180 32,305 1,226,198 1,986,396
CVs: Commercial vehicles; ICVs: Intermediate commercial vehicles; LCVs: Light commercial vehicles;
MAVs: Multi-axle vehicles; MCVs: Medium commercial vehicles; M&HCVs: Medium and heavy commercial
vehicles; T: Tonnes
Note
Source: CRIS INFAC
Goods vehicles: BTKM capacity Table 3.27

(BTKM) Trucks LCVs Total goods
vehicles
1990-91 429.5 53.6 483.1
1991-92 456.3 58.6 514.8
1992-93 470.4 63.4 533.8
1993-94 491.1 70.9 562.0
000000000000000000000000000000000000000000000000000000000000000000000000000000
1994-95 524.7 79.1 603.8
1995-96 596.2 92.1 688.3
1996-97 664.7 100.9 765.6
1997-98 688.5 105.0 793.5
1998-99 709.9 109.3 819.2
1999-2000 750.9 113.8 864.7
2000-01 775.0 118.7 893.6
2001-02 809.8 122.0 931.8
BTKM: Billion tonne kilometres
Note
Source: CRIS INFAC
Goods vehicles: BTKM capacity Table 3.28
(BTKM) LCVs (less LCVs LCVs ICVs MCV MAV Tractor Trucks CVs
than 6 T) (6-7.5 T) Total (7.5-9 T) (9-16 T) (16-25 T) trailer Total Total
1990-91 34.2 19.4 53.6 0.8 428.0 0.7 0.0 429.5 483.1
1991-92 37.1 21.5 58.6 1.1 453.9 1.3 0.0 456.3 514.8
1992-93 39.8 23.6 63.4 1.3 467.1 1.9 0.1 470.4 533.8
1993-94 44.6 26.3 70.9 1.6 482.0 6.4 1.1 491.1 562.0
000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
1994-95 49.3 29.8 79.1 2.1 510.9 9.7 2.0 524.7 603.8
1995-96 56.9 35.2 92.1 2.9 558.5 24.7 10.2 596.2 688.3
1996-97 62.5 38.5 100.9 4.8 602.9 38.9 18.1 664.7 765.6
1997-98 65.5 39.5 105.0 6.7 618.7 41.3 21.9 688.5 793.5
1998-99 68.4 40.9 109.3 8.6 626.7 47.1 27.4 709.9 819.2
1999-2000 71.4 42.4 113.8 11.3 640.6 62.8 36.2 750.9 864.7
2000-01 74.5 44.1 118.7 14.0 639.5 78.3 43.2 775.0 893.6
2001-02 76.5 45.5 122.0 17.0 635.8 104.4 52.5 809.8 931.8
BTKM: Billion tonnes kilometer; CVs: Commercial vehicles; ICVs: Intermediate commercial vehicles;
LCVs: Light commercial vehicles; MAVs: Multi-axle vehicles; MCVs: Medium commercial vehicles;
M&HCVs: Medium and heavy commercial vehicles; T: Tonnes
Note
Source: CRIS INFAC
Truck operators: Capacity utilisation Table 3.29

BTKM Freight movement Average capacity
capacity by road utilisation
(BTKM) (BTKM) (per cent)
1990-91 483.1 268.0 58.2
1991-92 514.8 297.3 59.6
1992-93 533.8 313.8 59.8
1993-94 562.0 342.9 62.6
0000000000000000000000000000000000000000000000000000000000000000000000000000000000000
1994-95
1995-96
603.8
688.3
345.6
387.7
59.3
60.0
1996-97 765.6 412.2 56.7
1997-98 793.5 437.6 56.1
1998-99 819.2 449.0 55.7
1999-2000 864.7 488.4 58.0
2000-01 893.6 509.7 58.0
2001-02 931.8 522.4 57.2
Note
Source: CRIS INFAC
Truck operators: Profitability (MCV - 16 tonnes GVW) Table 3.30a
(Rs/truck) 1998-99 1999-2000 2000-01 2001-02
Income from operations 1,008,932 1,141,548 1,184,952 1,165,020
Operating costs 710,536 769,022 894,900 946,801
Total fuel expenses 278,797 330,387 447,271 497,195
Engine oil expenses 34,275 36,723 39,171 41,619
Grease lubricant expenses 4,800 4,800 4,800 4,800
Tyres cost 122,140 121,216 120,098 114,107
Salary expenses 117,165 119,536 126,480 129,000
Other running expenses 153,360 156,360 157,080 160,080
Operating profit 298,395 372,526 290,052 218,219
Financial costs 179,326 179,326 179,326 179,326
Principal repayment 78,090 90,508 104,901 121,583
Interest 85,236 72,818 58,425 41,743
Insurance 16,000 16,000 16,000 16,000
Taxes 49,400 49,400 49,400 49,400
Net profit 69,669 143,800 61,326 -10,507
GVW: Gross vehicle weight; MCV: Medium commercial vehicle
Note
All figures are estimates for the 16 tonne GVW vehicle.
Source: CRIS INFAC
Sensitivity analysis: MCV - 16 tonnes GVW Table 3.30b

(Rs/truck) 1998-99 1999-2000 2000-01 2001-02
Payload: 9 tonnes
Income from operations 782,792 885,684 919,359 903,895
OPM (per cent) 17.8 20.9 10.5 3.4
000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
Net profit
Payload: 12 tonnes
-89,002 -43,194 -132,045 -198,409

000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
OPM (per cent)
Net profit
29.6
69,669
32.6
143,800
24.5
61,326
18.7
-10,507
Payload: 15 tonnes
OPM (per cent) 34.6 37.9 31.1 26.2
Net profit 192,646 292,768 215,646 139,522
GVW: Gross vehicle weight; MCV: Medium commercial vehicle
Note
Source: CRIS INFAC
Truck operators: Profitability (MAV - 25 tonnes GVW) Table 3.31a
(Rs/truck) 1998-99 1999-2000 2000-01 2001-02
Operating costs 892,236 966,074 1,125,900 1,189,542
Total fuel expenses 360,513 427,225 578,368 642,925
Engine oil expenses 29,547 31,658 33,768 35,879
Grease lubricant expenses 6,240 6,240 6,240 6,240
Tyres cost 196,131 194,576 192,645 182,899
Salary expenses 117,165 119,536 126,480 129,000
Other running expenses 182,640 186,840 188,400 192,600
Financial costs 262,415 262,415 262,415 262,415
Principal repayment 114,222 132,385 153,438 177,838
Interest 124,673 106,510 85,457 61,057
Insurance 23,520 23,520 23,520 23,520
Taxes 49,400 49,400 49,400 49,400
Net profit 152,210 351,794 223,605 172,522
GVW: Gross vehicle weight; MAV: multi-axle vehicle
Note
Source: CRIS INFAC
Sensitivity analysis: MAV - 25 tonnes GVW Table 3.31b

(Rs/truck) 1998-99 1999-2000 2000-01 2001-02
Payload: 15 tonnes
OPM (per cent) 28.5 35.4 25.8 22.1
0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
Net profit
Payload: 20 tonnes (33.3 per cent)
-9,861 138,256 23,013 -23,053

0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
OPM (per cent)
Net profit
34.2
152,210
40.7
351,794
32.2
223,605
28.9
172,522
Payload: 25 tonnes (66.7 per cent)
OPM (per cent) 38.4 44.7 37.3 34.4
Net profit 313,001 563,068 431,421 379,587
GVW: Gross vehicle weight; MAV: multi-axle vehicle
Note
Source: CRIS INFAC
(Rs/truck) MCV (16 tonnes GVW) MAV (25 tonnes GVW)
Income from operations 903,895 1,165,020 1,406,059 1,305,626 1,673,879 2,008,655
Operating costs 873,578 946,801 1,037,810 1,016,864 1,189,542 1,317,253
Total fuel expenses 482,194 497,195 514,340 557,202 642,925 685,787
Engine oil expenses 43,054 41,619 40,184 37,314 35,879 34,443
Grease lubricant expenses 4,800 4,800 4,800 6,240 6,240 6,240
Tyres cost 106,410 114,107 141,046 169,269 182,899 200,423
Salary expenses 129,000 129,000 129,000 129,000 129,000 129,000
Other running expenses 108,120 160,080 208,440 117,840 192,600 261,360
Operating profit 30,317 218,219 368,248 288,762 484,337 691,402
Financial costs 162,753 162,753 162,753 238,174 238,174 238,174
Principal repayment 78,090 78,090 78,090 114,222 114,222 114,222
Interest cost 68,663 68,663 68,663 100,433 100,433 100,433
Insurance 16,000 16,000 16,000 23,520 23,520 23,520
Taxes 49,400 49,400 49,400 49,400 49,400 49,400
Net profit -181,836 6,065 156,095 1,188 196,763 403,828
GVW: Gross vehicle weight; MAV: multi-axle vehicle; MCV: Medium commercial vehicle; PLT: Payload tonnes
Note

(Paise/tkm) MCV (16 tonnes GVW) MAV (25 tonnes GVW)
Income from operations 99.1 99.1 99.1 99.1 99.1 99.1
Operating costs 95.8 80.6 73.2 77.2 70.5 65.0
Total fuel expenses 52.9 42.3 36.3 42.3 38.1 33.8
Engine oil expenses 4.7 3.5 2.8 2.8 2.1 1.7
Grease lubricant expenses 0.5 0.4 0.3 0.5 0.4 0.3
Tyres cost 11.7 9.7 9.9 12.9 10.8 9.9
Salary expenses 14.1 11.0 9.1 9.8 7.6 6.4
Other running expenses 11.9 13.6 14.7 8.9 11.4 12.9
Operating profit 3.3 18.6 26.0 21.9 28.7 34.1
Financial costs 16.6 12.9 10.7 16.9 13.1 11.0
Principal repayment 7.3 5.7 4.7 7.4 5.8 4.8
Interest cost 7.5 5.8 4.8 7.6 5.9 5.0
Insurance 1.8 1.4 1.1 1.8 1.4 1.2
Taxes 5.4 4.2 3.5 3.8 2.9 2.4
Net profit -18.7 1.5 11.8 1.3 12.6 20.7
GVW: Gross vehicle weight; MAV: multi-axle vehicle; MCV: Medium commercial vehicle; PLT: Payload tonnes
Note
Truck operators: Assumptions for cost structure Table 3.34
MCV (16 tonnes GVW) MAV (25 tonnes GVW)
Assumptions for the estimation of income
Distance (Mumbai-Delhi) km 1,407.0 1,407.0 1,407.0 1,407.0 1,407.0 1,407.0
Freight rate (Mumbai-Delhi) Rs/tonne 1,394.9 1,394.9 1,394.9 1,394.9 1,394.9 1,394.9
Number of trips nos/month 6.00 5.80 5.60 5.20 5.00 4.80
Annual distance km 101,304.0 97,927.2 94,550.4 87,796.8 84,420.0 81,043.2
0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
Rated payload tonnage per vehicle
Average tonnage per vehicle per trip
tonnes
tonnes
9.0
9.0
9.0
12.0
9.0
15.0
15.0
15.0
15.0
20.0
15.0
25.0
Assumptions for the estimation of operating costs
Fuel efficiency km/lit 4.00 3.75 3.50 3.00 2.50 2.25
Engine oil requirement lit/100 km 0.50 0.50 0.50 0.50 0.50 0.50
Engine oil price Rs/lit 85.0 85.0 85.0 85.0 85.0 85.0
Grease lubricant requirement kg/month 5.0 5.0 5.0 6.5 6.5 6.5
Price of grease lubricant Rs/kg 80.0 80.0 80.0 80.0 80.0 80.0
No of tyres consumed (18/16 ply 1020) nos 6.0 6.0 6.0 10.0 10.0 10.0
No of tyres consumed (Stepny) nos 1.0 1.0 1.0 1.0 1.0 1.0
Replacement frequency km 50,000.0 45,000.0 35,000.0 45,000.0 40,000.0 35,000.0
Price of tyre (18/16 ply 1020) Rs/tyre 8,547.7 8,547.7 8,547.7 8,547.7 8,547.7 8,547.7
Price of tyre (Stepny) Rs/tyre 2,500.0 2,500.0 2,500.0 2,500.0 2,500.0 2,500.0
Salary for driver Rs/month 5,000.0 5,000.0 5,000.0 5,000.0 5,000.0 5,000.0
Salary for helper Rs/month 2,000.0 2,000.0 2,000.0 2,000.0 2,000.0 2,000.0
Food expenses of driver Rs/day 100.0 100.0 100.0 100.0 100.0 100.0
Food expenses of helper Rs/day 50.0 50.0 50.0 50.0 50.0 50.0
Average expense on tubes Rs/month 260.0 260.0 260.0 300.0 300.0 300.0
Average expense on spares Rs/month 5,000.0 5,000.0 5,000.0 5,500.0 5,500.0 5,500.0
Average expenses on repairs Rs/month 1,650.0 1,650.0 1,650.0 2,000.0 2,000.0 2,000.0
Overloading charges Rs/tonne 250.0 250.0 250.0 250.0 250.0 250.0
Misc exp per trip Rs/trip 100.0 100.0 100.0 100.0 100.0 100.0
Other miscellaneous expenses Rs 7,200.0 6,960.0 6,720.0 6,240.0 6,000.0 5,760.0
Other incidental expenses Rs 18,000.0 18,000.0 18,000.0 18,000.0 18,000.0 18,000.0
Continued...
...continued
MCV (16 tonnes GVW) MAV (25 tonnes GVW)

Assumptions for the estimation of financial costs
Cost of truck (Incl. chassis and body) Rs 670,000.0 670,000.0 670,000.0 980,000.0 980,000.0 980,000.0
Proportion of loan per cent 80.0 80.0 80.0 80.0 80.0 80.0
Tenure of loan Years 5.0 5.0 5.0 5.0 5.0 5.0
Flat interest rate per cent 8.0 8.0 8.0 8.0 8.0 8.0
0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
Frequency of compounding
Insurance premium
times/year
Rs
12.0
16,000.0
12.0
16,000.0
12.0
16,000.0
12.0
23,520.0
12.0 12.0
23,520.0 23,520.0
Assumptions for the estimation of taxes
State permit Rs/state 5,000.0 5,000.0 5,000.0 5,000.0 5,000.0 5,000.0
No of state permits nos 6.0 6.0 6.0 6.0 6.0 6.0
Local state permit Rs/month 1,400.0 1,400.0 1,400.0 1,400.0 1,400.0 1,400.0
Deemed profit for income tax Rs/month 2,000.0 2,000.0 2,000.0 2,000.0 2,000.0 2,000.0
per truck
No of trucks per operator nos 5.0 5.0 5.0 5.0 5.0 5.0
PLT: Payload tonnage per vehicle
Notes
1) The figures are for 2001-02.
2) The cost strcuture of truck operators has been estimated based on the three scenarios of payload tonnage per vehicle for
each of the 16 tonnes and 25 tonnes vehicle.
CVs: Demand forecasts for terminal life regulation Table 3.35

(nos) 2000-01 E 2001-02 E 2002-03 F 2003-04 F 2004-05 F 2005-06 F 2006-07 F CAGR
(per cent)
Alternative forecasts assuming that the Government imposes terminal life regulation in 2004-05
M&HCVs 87,497 88,657 98,838 104,812 108,583 145,154 170,114 13.9
Trucks 59,465 69,152 76,496 81,165 82,994 118,072 141,661 15.4
ICVs (7.5-9 tonnes) 8,881 10,195 11,212 14,034 15,325 19,879 23,380 18.1
MCVs (9-16 tonnes) 31,202 27,778 29,525 25,638 20,579 36,659 45,804 10.5
000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000
MAVs (16-25 tonnes)
Tractor trailors
15,255
4,127
25,592
5,587
28,670
7,089
34,347
7,147
39,182
7,909
51,002
10,532
60,024
12,453
18.6
17.4
Buses 28,032 19,506 22,341 23,647 25,589 27,082 28,453 7.8
LCVs 62,916 55,059 58,310 60,063 57,884 71,884 85,534 9.2
LCVs (less than 6 tonnes) 41,417 34,661 35,659 36,548 34,876 43,825 52,451 8.6
LCVs (6-7.5 tonnes) 21,499 20,398 22,651 23,515 23,008 28,059 33,083 10.2
Total CVs 150,413 143,716 157,147 164,875 166,466 217,038 255,648 12.2
CAGR: Compounded annual growth rate; CVs: Commercial vehicles; ICVs: Intermediate commercial vehicles; LCVs: Light
commercial vehicles; MAVs: multi-axle vehicles; MCVs: Medium commercial vehicles; M&HCVs: Medium and heavy
GVW: Gross vehicle weight; MAV: Multi-axle vehicle; MCV: Medium commercial vehicle; PLT: Payload tonnes
Source: CRIS INFAC

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Contents

3.11 Economic growth versus capacity utilisation of truck operators 55

3.26 Goods vehicles: Vehicle population on road 86

The demand for commercial vehicle is driven by a number of factors,

In 2002-03, the demand for commercial vehicles is expected to

Also, the demand forecast methodology adopted by CRIS INFAC

Demand for commercial vehicles Figure 3.1

Source: CRIS INFAC

Demand for commercial vehicles

Source: CRIS INFAC

Annual growth rate in demand for CVs Figure 3.3

Source: CRIS INFAC

Demand for LCVs Figure 3.4

Source: CRIS INFAC

Medium and heavy commercial vehicles (M&HCVs)

Source: CRIS INFAC

Demand for buses Figure 3.6

Source: CRIS INFAC

LCVs (less than 6 T) LCVs (6-7.5 T) ICVs (7.5-9 T)

Source: CRIS INFAC

Historical demand drivers

YoY growth in total freight movement

Source: CRIS INFAC

Freight movement: Share of rail and road Table 3.1

Freight rates: Railways versus road Table 3.2

Growth of population and urbanisation

Growth in road and railway network

Impact of diesel prices

Fuel prices versus demand for

Source: CRIS INFAC

Private bus operators

Companies and non-governmental institutions

Structure of the transportation sector

Transportation sector: Truck ownership Table 3.5

Distribution systems adopted by transporters

Operations of the transportation sector

Profitability of truck operators Chart 3.1

Scrap rate Existing Sales of CVs

Source: Industry, CRIS INFAC

Capacity utilisation of truck operators

Trend in freight movement of truck operators Figure 3.10

Average capacity utilisation of truck operators Average tkm per vehicle

Source: CRIS INFAC

Economic growth versus capacity utilisation

Source: CRIS INFAC

Growth in freight movement and capacity

Growth in freight movement by road Capacity utilisation of truck operators

Source: CRIS INFAC

Freight rates and fuel prices

Freight rates Table 3.6

Fuel price versus freight rates Figure 3.13

Source: CRIS INFAC

Capacity utilisation of truck operators and

Delhi to Mumbai freight rate Average capacity utilisation of truck operators

Source: CRIS INFAC

Truck operators: Trend in profitability Table 3.7

Impact of operating profits on demand for commercial vehicles

Profits of truck operators versus demand Figure 3.15

Weighted average estimated operating profit per vehicle Sales of M&HCV

Source: CRIS INFAC

Comparison between profitability of 16 tonnes vehicles and 25 tonnes vehicles

Profitability of transporters using MCV or MAV Table 3.8

Market size and future growth