Truck sale revving up, bus hits 7-year low

As the wheels of the economy begin to roll in the second year of the pandemic, the commercial market for vehicles has begun to recover from the 2020 fallout.

Industry insiders say goods transportation has been on a steady rise since the 66-day nationwide shutdown amid the first wave of Covid-19, spurring the demand for trucks and other cargo carrier vehicles.

On the other hand, amid repeated revenue disruptions and a very high barrier to entry, investments in public transportation are drying out – be it in buses, human hauliers or three wheelers.

In the meantime, consumers showed an increasing preference for private transport which helped the car and two-wheeler sales more than recover from the pandemic shock.

According to the annual vehicle registration data from the Bangladesh Road Transport Authority (BRTA), the total registration of all segment vehicles increased by 18% in 2021 compared to last year.

This follows a 24% decline in 2020 amid the first wave of the pandemic.

Of the increase, registration of cargo vehicles, including trucks, covered vans, pickups, delivery vans, and road tankers grew by 18.5%, following a 26% decline in 2020 when demand for all vehicles, except ambulances, fell.

"The pandemic, two years ago, came as a big blow for the transport businesses and it is now recovering," Bangladesh Automobiles Assemblers and Manufacturers Association (BAAMA) President Abdul Matlub Ahmad said.

Besides the bus owners, truck owners had their hardest time during the first shutdown in the March-May period of 2020 when factories remained shut for weeks.

However, since then, truck business has managed to recover significantly as the government did not go for a complete shutdown in 2021.

Corporates lead truck demand recovery

When the economy reopened in the mid-2020, the government came up with a big stimulus package for businesses. Corporates then began to opt for having their own large cargo fleets with an eye on building an undisrupted supply chain – a significant strength for many businesses.

Industries, including textiles, construction materials and the consumer sector, have since been buying a large portion of trucks and covered vans in 2021, said Matlub, the chairman of Nitol-Niloy Group that assembles and distributes market leading Tata commercial vehicles.

Taskeen Ahmed, director of Ifad Automobiles, the assembler, body manufacturer and sole distributor of Ashok Leyland buses and trucks, said corporate clients are contributing to at least 20% of the commercial vehicle demand nowadays, up from the previous average of 10%.

His company is shipping 18-24 buses and trucks from its Dhamrai plant every day, a number which fell to 8-10 in July-August due to a resurging virus and lockdown hurting buyers' confidence.

Covered vans are the only commercial vehicle segment that surpassed the pre-pandemic level, according to the BRTA.

Corparates have also turned out to be the most important source of growth in the trucks segment, while some new individuals, defying the disruption worries, have been making fresh investments to own new trucks.

Fleet expansions by existing truck owners are still slow after the 2020 financial hiccups, coupled with the diesel price hike a few months ago which seems to have prolonged the sluggish demand, said Baama President Mr Matlub, also the chairman of Nitol-Niloy Group.

Meanwhile, pickup trucks having a 1 or 1.5 tonnes capacity, which were needed for the most essential cargo trips amid the shutdowns and lockdowns, suffered the least dent in 2020.

Hence, their bounce back is not that dramatic. The vehicle segment experienced a 43% fall and 23% growth in the last two years.

Pickup sales could grow more if the double cabin ones did not face a slowdown following a halt in government procurement, said SM Jashim Uddin, Energypac's general manager heading its JAC commercial vehicles unit. 

Revenue from the cargo vehicles segment of listed companies selling commercial vehicles has also seen a rise in the July-December period of 2021, compared to the same six months of 2020 when there had been no lockdown.

Indian brands Ashok Leyland, Eicher, and Chinese brands JAC and Foton have fetched higher year-on-year revenue in July-December for the companies Ifad Autos, Runner Motors, Energypac and ACI Motors respectively.

Only Aftab Automobiles Ltd, which builds the bodies of and sells Japanese Hino buses, posted a sharp decline in its commercial vehicle revenue.

Consecutive decline in passenger vehicle sales

During the pandemic, people tended to avoid public transport as much as possible, said Matlub Ahmed.

On top of that, as soon as the Coronavirus surges, public transports suffer the most regulatory disruptions, including running on limited capacity or outright suspension of services.

Also, the high barriers to entry – route permits, association membership and a very strict documentation – has also deterred new investors from owning a bus fleet, Matlub said.

In the uncertain pandemic period not many transport businessmen wanted to invest in new buses, while the revenue from their existing fleets were down, he added while explaining the drastic drop in bus sales.

In 2021, the BRTA registered the lowest number of buses since 2014.

Suvenker Ghosh Rakesh, managing director of Shyamoli NR Travels, a leading bus service firm, said his company had been adding 40-50 buses to its fleet every year. 

The number would have been zero in 2020 and 2021, but the company bought six luxury buses in the last two years to meet a niche market demand.

"We had to spend more than Tk6 lakh on each bus during the 66-day nationwide shutdown in 2020 for their maintenance and getting them back on roads, for which we needed tyres, batteries and many replacement parts," he said.

"Over the period, we lost out on at least Tk3 lakh in profits from each of our buses."

Bus owners barely enjoyed the full benefit of the economic reopening due to the demand volatility, regulatory disruptions and most recently, the diesel price hike, said Khandaker Enayet Ullah, general secretary of the Bangladesh Road Transport Owners' Association.

Mr Ghosh said most of the long-route buses were running with a narrower profit margin after the 23% diesel price hike in November.

"We are under pressure to retain affordability and demand for our services, alongside securing our fair margin," he added.

"It all adds to our prevailing struggle to pay off bank loans," said Khandaker Enayet Ullah.

The association leader himself sold off a portion of his bus fleet to avert financial ruin, he revealed.

With many lossmaking fleet owners failing to service their bank loans now, this has become another concern and a deterrent to further investment.

Ghosh said some banks were not willing to lend to the transport sector seeing the ongoing financial hardship, which must go. 

All the entrepreneurs, however, said they expect a steady rise in commercial vehicle sales in both the passenger and cargo segments in the coming years as the vast south-western part of the country is going to be connected by road with the capital after the commissioning of the Padma Bridge.