K. T. Jagannathan

Good roads lead to changing profile of freight business

Unit sales record 25 p.c. CAGR in three years

Cheap money drives demand from truckers

CHENNAI: T.T. Srinivasaraghavan, Managing Director of Sundaram Finance, has called for a fresh methodology to track growth in the commercial vehicle industry so as to reflect the reality.

At present, the growth is measured in terms of unit sales.

The reality is buried behind the numbers and, hence, the unit sale figures do not reveal the true picture of the commercial vehicle industry.

In an interview with this correspondent, Mr. Srinivasaraghavan said, “we should start tracking growth in terms of tonnage and not units. The methodology needs to be changed.” The commercial vehicle industry had seen an over-capacity build-up if one went by the tonnage, he said. Last year, the excess capacity got counter-balanced due to the Supreme Court ruling on overloading, he said. This was, however, a one-off correction, he said.

There had been a 25 per cent CAGR (compounded annual growth rate) in the last three years in the commercial vehicle segment in terms of unit sales.

The growth in terms of tonnage, however, had happened more in the heavier end. “Tracking the growth in terms of tonnage rather than units will then reveal the true picture,” he said.

Six-lane roads, Golden Quadrilateral and overall improvement in road infrastructure had all been pushing for a new methodology to track growth in the commercial vehicle industry, he said. Until not so long ago, cheap money (due to lower interest regime) was also driving demand from truckers.

The changing profile of entire freight side of the business — from rigid vehicles to multi axles and articulated vehicles — was also happening because of good roads. For the five months ended August 2007, medium CV segment was down five per cent. The drop in haulage segment, however, was dramatic during the period, he said.

For Sundaram Finance, it was now a question of rebalancing and re-orienting. The emergence of IT (information technology) and BPO (business process outsourcing) industries in the country had seen a demand explosion for buses. “Bus financing is an opportunity. We have been doing that in Tamil Nadu for a long time,” he said. “However, our bread and butter will always be truck financing.