Logistics

After Covid disruptions, bus makers ‘cautious’ on demand recovery

Ayushi Kar Mumbai | Updated on June 15, 2021

Demand seen reviving in third and fourth quarters of this fiscal   -  The Hindu

Hope mandatory scrappage policy, restart of people’s movement will drive demand

The long-drawn Covid-19 pandemic had pushed sales for buses to an eight-year low in FY21 but bus makers such as Ashok Leyland and Tata Motors are betting that the mandatory scrappage policy for state transport undertakings (STUs) as well staff applications and the restart of labour movements will revive demand this fiscal.

Lockdowns during the first and second wave of the pandemic were big blows to mobility of citizens. Work from home for many organisations, closure of schools, muted demand from the tourist segment and transition to BS-VI emission norms had crippled bus sales in FY21. Anuj Katuria, COO, Ashok Leyland, said demand for buses during the first and the second quarter of FY21 was almost nil due to the pandemic.

Upsurge in pre-buying

But during the January-March period, Ashok Leyland found an upsurge in pre-buying of buses, by operators stocking up on vehicles to avoid the subsequent high prices in March. “This pre-buying was mostly driven by STUs. This further increased the blow since government operators are our only customers that were in a financially viable position to buy buses during the pandemic. This pre-buying is likely to have had a suppressive effect on the demand,” Katuria explained.

Hetal Gandhi, Director, Crisil, also explained that the transition to BS-VI norms in March last year increased the prices of buses by 8-10 per cent. The mandatory scrappage policy announced in March 2021, aided in maintaining a trickle of demand from STUs, seeking to upgrade their fleet. According to the policy, vehicles owned by the government need to be updated by April 2022. With some vehicles in STUs’ fleet over 50 years old, this upgrade was long overdue. However, Vinod Aggarwal, MD and CEO, VE Commercial Vehicles, said the purchase by government STUs continued to be at low levels. Representatives from OEMs Ashok Leyland and Tata Motors also concurred with this observation.

Another segment that helped maintain the demand was staff transportation, according to Katuria. With manufacturing sector continuing operations, employers had to order more buses to comply with the social distancing norms that reduced the number of workers they could transport per vehicle

Buying by schools

Buying of buses by schools that occurs between the period January and July, was also a major miss in both FY21 and FY22. “School buses normally account for 25 per cent of buses sold in the country and this has been a major blow for these two years,” Katuria said.

OEMs saw some green shoots of recovery between the first and second wave. For instance, Rohit Srivastava, Vice-President, Product Line, Buses, Tata Motors, said there was some traction in the fourth quarter of FY21 with an uptick in school bus applications. However, it was wiped out with the second wave. Crisil’s Gandhi said between the first and the second wave, sales recovered by 108 per cent. However, given that the volumes remained at 45 per cent compared to FY20, no significant recovery was witnessed.

With an ebb in the the second wave and vaccination drive growing, OEMs remain confident of some recovery.

For instance, Eicher’s Aggarwal believes that recovery is likely to commence from July. Katuria thinks Ashok Leyland will see a lag in demand from private operators who still need to get back on their feet. Thus, contacts from them will come in Q3 and Q4.

Demand drivers

Katuria believes that the drivers of demand for Ashok Leyland will be the mandatory scrappage policy and the ₹18,000-crore subsidy for buses announced in the Union Budget. Srivastava said that Tata Motors is seeing greenshoots with IT industries gearing up for staggered work hours from the office as well as the restarting of labour movements in States like Uttar Pradesh, Bihar and Rajasthan. “However, school buses form a larger share of the market, and we are waiting for signs of restart of schools to have an uptick in volumes,” said Srivastava

Yet, most of the manufacturers remain cautiously optimistic. However, Crisil’s Gandhi said: “Even though bus sales are expected to show robust on-year percentage growth in FY22, the volumes are expected to be below FY04 levels. The recovery would be mere optical in nature.”

Published on June 15, 2021

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