The economy is showing signs of acceleration, as reflected in the brisk sale of medium and heavy commercial (MHCV) vehicles. Tata Motors is guiding for 12-15 per cent growth in the MHCV segment.

Speaking to Bloomberg TV India , Ravi Pisharody, Executive Director - Commercial Vehicles, Tata Motors, says the shift from BS-III to BS-IV will boost sale of vehicles during FY17.

The commercial vehicles sector has revived and posted good growth? For FY17, the growth is pegged at 14-15 per cent. What is going to drive the growth?

Commercial vehicles have to be split up into at least two-three parts as far as growth is concerned. We can see two distinct trends. The sales of medium and heavy commercial vehicles started growing since the middle of 2014. And usually, they are the indicator of a recovery or even a downturn. Even during the slowdown, we saw the MHCV segment leading this trend in the early part of 2012. It took almost a year for people to accept that India was in a slowdown.

And in that sense, the light and small commercial vehicles and buses followed the downturn a year later. So we are seeing somewhat of that trend. The MHCV segment started growing, and last year, FY16, the total industry volume was just short of the previous peak, which was in FY11-FY12.

This year, we are expecting that peak to be crossed. We do have an extraordinary factor this year that will drive demand in the second half — the conversion of BS-III to BS-IV. In cities, this has already happened. Which is why for smaller vehicles and buses it is not such a big change. Even there, it will be a complete shift.

But MHCV has hardly moved to BS-IV because their registration happens in smaller towns. So that change will be quite radical. Even on a high base, the growth in the first half may not be there, but it will be dramatic in the second half. We will see good growth. On a relatively high base, we will see somewhere between 12 and 15 per cent growth on MHCV. And for smaller vehicles — for a very different reason — the base is still low.

And gradually, the economy is picking up and we are seeing some long-distance movement starting, which means the last-mile transport will also be required. So, we are seeing growth again of about 15 per cent, coincidentally, though the factors are very different on a small base. So net-net, we expect the growth to be of that order for the full year.

How is the LCV segment looking like going ahead?

We have been seeing steady growth for the past six months. For most of last year, Tata Motors in particular, had the problem when we were reporting CV numbers, a lot of MHCV growth was being offset by LCV decline. It looked like we were growing only 2-3 per cent while others were growing faster.

But if we look at MHCV only, we were quite alright. From January onwards, we have been reporting double-digit growth for most of the months. We are seeing that trend consistently. Even in June, the LCV growth was 13-15 per cent. But it is still not really in good shape. The peak numbers were in FY12 and FY13; I think we are still far away from the peak. And even though finances have tightened and peak loan rates have dropped to 80-85 per cent, there are still a lot of early defaults in terms of financial portfolio. I think growth is on a slow base. It usually takes a year to play out. A good sign is that the economy is picking up.

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