The long-awaited recovery in light commercial vehicle (LCV) market appears to have happened across the segment with sustained growth in sales for the past few months.
This marks the long awaited sign of a complete recovery in the goods category, which was in the grip of a long down cycle. Typically, the LCV segment is the last one in the CV market to see the recovery when a down cycle ends.
Led by the pick-up segment, LCV (trucks) sales started seeing recovery from the fourth quarter of 2015-16 after being in negative growth lane for about two years. In April, the LCV trucks segment registered an increase of 14 per cent in volumes, at 30,320 units as against 26,595 units in April 2015.
“Only last quarter, small commercial vehicles started moving up for the first time after two years and the light commercial vehicle segment started hitting the double-digit number. So the growth journey in small and light have started now,” according to Ravindra Kundu, Executive vice-president and Business Head (Vehicle Finance), Cholamandalam Investment and Finance Company.
The recovery in small trucks has been driven by some revival in demand for last-mile connectivity, improving viability (owing to lower diesel prices) and low-base effect.More demand
“We expect the demand to further improve in 2016-17 on replacement-led demand, some pre-buying ahead of the implementation of BS-IV norms across the country by April 2017 and gradual recovery in demand from consumption-driven sectors,” Shamsher Dewan, vice-president, ICRA, told BusinessLine .
He further said: “The impact of a favourable monsoon will also help in supporting demand for LCVs given the fact that a sizeable part of the demand comes from rural and semi-urban markets.”
The LCV (trucks) segment is expected to record a growth of 12-13 per cent this fiscal. It clocked a total volume of 3.34 lakh units in 2015-16.
In LCVs (trucks), the small commercial vehicle (SCV) segment (mini and pick-up trucks in sub-3.5-tonne category) is the largest segment by accounting for about 90 per cent of the volumes. SCVs are mainly used for last-mile transportation of goods.
In terms of market share, Tata Motors has been seeing pressure on its LCV market share on back of strong traction for Mahindra and Mahindra’s new launches and market shift in favour of pick-up trucks.
While Tata remains the leader in the mini-truck segment (73 per cent share), Mahindra dominates the pick-up segment (76 per cent).
Though Tata has been battling to grow its share in the mini-truck segment, it managed to improve its position in the pick-up segment and also regained the second position that it had lost to Ashok Leyland in the previous fiscal. In April, Tata clocked 2,319 units when compared with 2,186 units by Ashok Leyland in the pick-up segment. Mahindra sold 9,777 pick-ups during the month.Premium flavour
Meanwhile, the pick-up segment is increasingly seeing premium flavour with the entry of companies such as Isuzu as also due to changing customer preferences.
“The share for premium LCVs is unlikely to increase significantly owing to price differential and cost-conscious customer segment in India. Premium LCVs are widely accepted in developed markets, where they have a sizeable captive consumer segment,” said Dewan.
“In India, that segment is relatively small and is limited to relatively affluent farming community in states such as Punjab and Haryana.”