The sales trend in the medium and heavy commercial vehicle (M & HCV) segment over the past four months seems to indicate some positive signs of volumes bottoming out even as the macro-economic indicators that influence the demand for trucks remain weak.
M&HCV sales have been growing month-on-month basis from November 2013. Both the goods and passenger segments have reported month-on-month growth from November last year to February 2014. Total volume (monthly) in the segment has grown from 11,523 units to 16,372 units in the past four months. Interestingly, truck freight rates also firmed up in the past two months.
Recent cut in excise duty is also expected to help as a four per cent cut on a Rs 20 lakh truck will give a saving of Rs.80,000. However, it is still early to gauge the real impact of duty cut. While the macro-economic indicators are still not favourable, the monthly sales rise seems to be giving some relief for the truck-makers, who have been under grips of longer-than-expected cyclical slowdown.
Terming the sequential improvement in M&HCV sales as seasonal impact, Subrata Ray, Senior Vice President – Corporate Ratings, Icra, explained that second-half of the fiscal would normally fetch about 55 per cent of annual sales. The key reason for this trend is primarily due to push by OEMs and dealers to achieve their targets, and secondly, the depreciation benefit that is available to fleet operators. “For a sustainable recovery, this trend may have to continue for a while before it could be termed as a recovery,” he added.
Tata Motors’ Executive Director – Commercial Vehicles, Ravi Pisharody, had said that the first-half of current calendar year would not see much improvement, while there might be some advancement in truck purchases by fleet operators. Industry experts admitted that M&HCV volumes bottomed out, but were of the view that recovery would start from the second-half of 2014. “Volumes are expected to recover from H2 onwards. This will largely be led by some replacement demand, impact of recent excise duty cut, and low-base effect besides expectations of recovery in the overall capex cycle. There is also expectation of some demand recovery from the mining areas,” pointed out Mr. Ray.
