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Key Earning Drivers Economic Activity: The availability of freight depends on the economic activity in the country. Therefore, an increase in economic activity broadly represented by growth in GDP helps in increasing the freight availability. Government policy: The GOI policy towards depreciation norms, excise duty sales tax etc will have a bearing on the demand for MUVs and CVs. The levy of 12% uniform sales tax already has and may in the near future play a role in the performance of the industry. Implementation of infrastructure projects: The implementation of infrastructure projects will have a positive impact on demand for CVs & UVs as they are extensively used in transportation of material and people requirement of the projects. Therefore the mega projects like National Highway project, Dhabol power project-II will trigger the demand for segment. Freight rates: The freight rates determine the revenue component of fleet operators. The improvement in freight rates consistently, over a period of time will improve operating profits and build confidence measure for operators. The increasing operating margins combined with improvement in fleet capacity utilization will help in boosting the demand for commercial vehicles. Presently, where on one end, the diesel prices have shot up considerably, on the other end, freight rates have come down substantially due to lack of business. This has in turn affected the operating margins of the fleet operators. If this continues, the fleet operators will not be in a position to extend their operations, thus ultimately pulling down the commercial vehicle sales. Movement in diesel prices: The diesel prices are controlled by the GOI notifications. As a measure of phased dismantling of APM, diesel prices have been linked to international oil prices. This along with drop in oil prices to a decade low, led to drop in diesel prices. This has helped in improving operating margins for operators. But the imposition of one rupee cess, to be used for building road infrastructure, has nullified the effect. Therefore, changes in the GOI policy have to be traced as it has a strong bearing on operating margins of operators. The recent hike in diesel prices have imposed immense pressure on the transport companies and fleet operators, as they are also suffering from lower freight rates. Policy on scrapping of old vehicles: The recent notification by judicial body to ban commercial vehicles above 20 years in age in New Delhi will lead to a demand for at least 15,000 vehicles to be satisfied in short period of time. If similar measures are implemented in other parts of the country will boost demand for new vehicles. Other sector reports Previous chapter Next chapter

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