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Contrary to initial expectations, the medium and heavy commercial vehicle (M&HCV) industry is likely to end the current fiscal with flat sales over last year. The industry had forecast double-digit growth for the current year.
During the first half of this fiscal, the M&HCV goods segment reported a marginal drop of two per cent in sales at 113,781 units. In September, volumes fell 24 per cent and that was fourth consecutive months of fall in sales.
Key reasons cited for the slowdown in truck sales include moderating replacement demand, uncertainties over GST impact, weak cargo generation from industrial sectors and muted construction and mining activity on the back of severe rainfall.
On the GST front, there are a few aspects that are making transporters circumspect regarding their buying decision. There is uncertainty around the discounts which transporters can avail in FY18, owing to GST. Warehouse re-alignment is expected, and hence, transporters are unsure about the type of vehicles which will be required to serve demand, according to SIAM.
Also keeping in mind the shift in warehouses at the end-user level, transporters fear loss in business, and hence, might postpone buying decision. However, industry analysts expect improvement in overall economy led by an increase in industrial and agri output to spur demand.
Though pre-buying on account of BS IV norms has not been happened so far, industry expects the Q4 of this fiscal to see pick up in pre-buying sales.
The M&HCV segment is expected to witness some respite in the second half of the year supported by increase in pre-buying ahead of BS IV implementation, pick up in post-monsoon construction and mining activity, growth in infrastructure, rural recovery and tightening of overloading regulations, according to Rakesh Batra, Partner and sector leader, Automotive, EY India .
Ravi Pisharody, Executive Director – Commercial Vehicle Business Unit, Tata Motors, had recently pointed out that there wasn’t any significant change in macro economic factors for a down cycle in the segment. “Good monsoon and pre-buying would augur well for the segment,” he added.
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