Commercial Vehicle Sales Decline Heavily
While the overall automobile industry is facing demand issues, commercial vehicle manufacturers are the worst hit. Domestic commercial vehicle sales plummeted drastically in Aug. As per initial figures received for Aug 2019, the overall commercial vehicle industry in India declined by 40% vis a vis Aug 2018.
Poor freight availability and subdued consumer sentiments on account of an overall slowdown are touted as the main reasons behind falling sales. GDP growth rate of 5% in the last quarter has started showing its effect with every passing day. Sales of long haul MHCV trucks is often considered as a barometer of economic activity and any growth or decline in economic activity reflects directly on its numbers, whereas the effect on light commercial vehicles is visible after a time lag. The same trend can be seen in the current situation when the fall in numbers has started reflecting in LCVs and SCVs also, though with a lighter intensity.
Commercial vehicle manufacturers with higher dependence on MHCV trucks are the worst hit. Sales of MHCV range of Ashok Leyland trucks declined 70% to 3336 units last month as against 11135 same months last year. While sales of MHCV range of Tata trucks declined 58% from 12715 units last year.
“Subdued demand sentiment due to poor freight availability, lower freight rates and general slowdown in the economy continued to hamper the commercial vehicle demand. System stock reduction through retail focus and aligning production will continue to be our approach, while cautiously monitoring the market, in these challenging times. As a result, retail sales are estimated to be ahead of wholesale by over 25% in August,” Mr. Girish Wagh, President (Commercial Vehicles Business Unit), Tata Motors, said.
Read More : Govt raises axle load capacity of trucks
Industry experts also believe that a couple of regulatory changes announced over the past 1-2 years have together led to this situation. Some of them being introduction of increased axle loading norms which have resulted in excess capacity in the market for the existing freight, announcements of hike in registration fee, alignment of focus over electric vehicles, to name a few.
In the last week of Aug, Finance Minister Ms. Nirmala Sitharaman had made a series of announcements in a bid to revive the economic slowdown. It included boosting consumer sentiments on the purchase of BS4 vehicles that would have a valid registration for their lifetime. Not just the vehicle lifetime, a 15 percent additional depreciation and withholding the increase in one-time registration fee till June 2020, was also announced. Besides this, the government departments would be free to procure new vehicles in replacement of the aging fleet.
While the recent government announcements will take time to reverse the trend, we hope that the upcoming festive season and pre-buying before the BSVI timeline of 1st April 2020 shall boost the sales in the coming months.
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