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This article is more than 3 year old.

Auto stocks trade mixed on new load carrying rules; Ashok Leyland, Tata Motors rise, Eicher Motors down

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Auto stocks traded mixed on Tuesday, shrugging off concerns emanating from the Narendra Modi government’s new rules raising the existing load carrying capacity of trucks and heavy commercial vehicles.

Auto stocks trade mixed on new load carrying rules; Ashok Leyland, Tata Motors rise, Eicher Motors down
Auto stocks traded mixed on Tuesday, shrugging off concerns emanating from the Narendra Modi government’s new rules raising the existing load carrying capacity of trucks and heavy commercial vehicles.
Commerical vehicle makers, Ashok Leyland, was trading at Rs 127.50, rising by 1.39 percent on Monday. The stock had closed at Rs 125.75 on Tuesday. Ashok Leyland stock closed at Rs 128.50, adding Rs 2.75, or 2.19 percent higher on the BSE.
Eicher Motors traded at Rs 27,195.05, down by 0.72 percent or Rs 197.50, further declining from its previous close of Rs 27,392.55. The scrip finally settled at Rs 27,215.95, losing Rs 176.60, or 0.64 percent on the BSE.
Home-grown automaker, Tata Motors, is up by 1.87 percent, trading at Rs 256.25 after yesterday’s close of Rs 251.55. The stock rose to Rs 257.60, adding Rs 6.05, or 2.41 percent in the end on the 30-share index.
Mahindra and Mahindra, India's biggest tractor manufacturer, shares were also up by 1.23 percent at Rs 911.50, from its previous close of Rs 900.40.  M&M stock settled at Rs 921.10, gaining 2.30 percent, or Rs 20.70 on the BSE.
The BSE Auto traded higher by 0.62 percent, while the Nifty Auto too rose 0.60 percent. Nifty Auto posted gains of 1.20 percent in the end, while the BSE Auto closed higher by 1.26 percent.
As many as 14 stocks advanced on the Nifty Auto, while one declined and one remains unchanged.
Auto stocks were hit yesterday over concerns that the increase in carrying capacity would affect demand for commercial companies.
The development came after CNBC-TV18 first reported on Monday that the government is set to revamp existing policy, necessitated by the violation of old loading norms, improvements in road quality and vehicular technology.
The rules have been amended after 35 years and under the new norms, the loading capacity for different categories of trucks will go up by 15-25 percent.
Industry as well as All India Traders Welfare Association are analysing the impact of new rules.
In an exclusive interview to CNBC-TV18, Ashok Leyland, managing director and chief executive officer, questioned the logic behind enhanced limits.
He said, "It's rather confusing at this point because somebody who has bought a vehicle let us say for 25 tonne, that vehicle has been designed for 25 tonne, braking has been designed for 25 tonne and everything on the vehicle, chassis has been designed for 25 tonne. I know that suddenly if they put in something where people can carry extra load and while they are saying that they will now be extra stringent on the penalties, I do not know to what extent that is possible."
All India Transporters Welfare Association (AITWA) president Pradeep Singal told CNBC-TV18 that he tried to reach out to the government for clarifications with respect to load carrying.
He expects freight rates to fall post government's notification for load carrying.
However, industry analysts aren’t amused. SP Singh of Indian Foundation of Transport Research & Training, questions the government’s rationale behind the decision.
“Overloading should become zero tolerance post this notification. 70% of fleet is currently being overloaded. All vehicles on road will be allowed to carry excess load. Government has to give clarity on what the rationale is behind this decision,” Singh told CNBC-TV18.
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