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November 08, 2021

FreightSigns

What is the goods traffic, and the free cash flow of fleet operators, telling us?

Freight rates perk up some more, but diesel singes margins

 

With the monsoon withdrawing, consumption recovering, and infrastructure activity picking up, freight rates saw a sequential recovery in October. However, with diesel prices ruling high after a scorching run-up, the overall profitability of transporters remains below levels seen in the closing quarter of last fiscal.

Decadal capex cycle

The recovery has been broad-based, with most routecommodity combinations seeing an increase in freight rates. In October 2021, ~80-85% of the combinations saw an improvement in freight rates over August 2021, while ~15-20% were unable to pass on the diesel price hikes due to demand-supply considerations.

Decadal capex cycle

CRISFrex captures changes in freight rates on a sequential basis. What makes it first-of-its-kind in India is that it also tracks the free cash flows, or FCF (pre-EMI) of transporters on an ongoing basis. Higher FCF would typically lead to higher demand for commercial vehicles.

Decadal capex cycle