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Tata Motors has said that its commercial vehicle business is turning around and will reach pre-Covid levels in value terms much faster than volumes.
The commercial vehicle sector has been showing improvements in volumes month-on-month due to recovery in demand, supported by revival in infra and construction activities across the country.
In its heyday, Tata Motor would sell about 120,000 or 130,000 units of CVs in a quarter. But in the December 2020 quarter, the company sold about 84,000 units.
Therefore, in volume perspective, there is still a long way to go for Tata Motors and the industry as a whole. But the good news for the CV maker is that companies are now getting more revenue due to higher realisations than what they used to be during the BS-IV era.
Tata Motors’ Group Chief Financial Officer, PB Balaji, points out that three factors drive higher realisations now. First, BS VI trucks are now priced 10-12 per cent more than BS IV trucks. On the back of truck modernisation, people are moving to higher tonnage vehicles as they are able to see better TCO (total cost of ownership).
Now, with trucks coming packed with new technologies and features such as telematics, people are increasingly interested in buying such trucks due to the various benefits. Due to these factors, realisations are better now and are likely to sustain.
Overall CV volumes
In Q3, Tata Motors’ overall CV volumes were down 8 per cent. However, the value of CV business grew 21 per cent during the period, spurred by higher realisations.
“Overall, we have definitely turned the corner with respect to M&HCV (medium and heavy commercial vehicle) and I&LCV (Intermediate & light commercial vehicle) businesses. With value growth in this business, we should be able to reach the pre-Covid levels of value in CV business much faster than pre-Covid levels of volume even though volumes are improving, too,” said Balaji.
Tata Motors’ commercial vehicle business’ revenue grew 21 per cent in Q3 of this fiscal, led by M&HCV and I&LCV segments.
The CV market share continues to strengthen, with M&HCV stable at 59 per cent and I&LCV share sharply improving to 46 per cent. We are seeing improvments in small commercial vehicles and buses as well, said Balaji.
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