Scrappage policy will not push CV recovery: Ajay Srinivasan

Which Commercial Vehicle (CV) segment is going to see a recovery first?

For recovery in the CV segment, passenger segment recovery will have the most challenges. The passenger demand was from State transport undertakings, private tour operators and the tourism segment. The tourism segment has been worse hit and STUs are also not getting too much funding from the government as finances are diverted towards healthcare and infra. STUs are generally making losses and need government support and tracking tenders for the past 7 to 8 months we have seen that there is not a significant demand for passenger CVs. The school segment is not going to improve until next year. Demand for medium to heavy commercial vehicles and light commercial vehicles are getting better since investment in infrastructure and construction is bringing back demand. However, most recovery will be optical. Scrappage policy will not push CV recovery so much since scrapping is a mandatory policy. An operator will scrap a vehicle if he is getting good incentives, vehicles not generating any revenue etc. Government incentives will not be enough to generate true scrappage demand. Two things will be necessary for the recovery of this segment, firstly there should be the sustainability of demand, and financiers gain confidence in the sector again which will take some time. Recovery is likely in the second or third quarter of the next fiscal.

How have the new regulations such as BSVI, safety regulations etc affected demand?

BSVI has impacted demand for commercial vehicles, especially since this was introduced at a time where OEMs were also going through a tough time. Thus the market has seen an overall reduction in discounts etc, which has affected demand. In the case of two-wheelers, BSVI has led to a price increase of 10 to 12 per cent. Cost of acquisition in terms of safety regulation, insurance cost has led to a spiralling impact in terms of the acquisition cost of two-wheelers. The most affected was the demand for two-wheelers in the commuter segment. BSVI did not have much effect on personal passenger vehicles.

Is the Silicon shortage worse this year, what is likely to be the effect?

This is something that has a very severe impact, not just in India but across the whole world. Since Covid did not have too much effect on the demand, OEMs have not been able to place as many orders for components as they have a demand for. Furthermore, with the shift towards electricity, dependence on silicon has increased. This year could be a challenge, although after the second quarter there will be some improvement on this front.

There has been a push across the country, where a few State governments have come up with electrification policies. Do you think the electrification push in India is holistic?

The major challenge is that we need industries to commit and make investments. Policies such as FAME give some sense of what the government is thinking. However, there is no long-term policy roadmap that the government is charting. There is a lot of uncertainty in the ecosystem regarding how to completely change and commit investment. Furthermore, there is a lot of uncertainty in financiers, so EVs are not getting financed easily. Two-wheelers and three-wheelers for last-mile distribution are places where electrification seems inevitable, and even OEMs are looking at that. With regard to the passenger segment, CNG seems a better option given the fuel prices. EVs will need a significant long term policy roadmap to be adopted.

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