BS VI pre-buying to boost demand: VECV

VECV has been supplying Euro VI engines to the Volvo Group for the last six years, says Vinod Aggarwal.

VECV has been supplying Euro VI engines to the Volvo Group for the last six years, says Vinod Aggarwal.   | Photo Credit: PAUL NORONHA

CV sector to improve from September.

VE Commercial Vehicles Ltd. (VECV), a joint venture between the Volvo Group and Eicher Motors, said it hoped demand would improve in the January-March quarter as a result of pre-buying by customers ahead of BS VI norms kicking in from the next financial year.

“We are looking at some green shots at this point because of the pre-buying. People were deferring replacement and not buying BS IV vehicles. Now, of course, if they don’t buy before March 31, the prices are going to go up with BS VI vehicles hitting the market from April 1,” Vinod Aggarwal, MD and CEO, VECV, told The Hindu.

“We expecting some pre-buying to happen during this period. And we are already getting more enquiries, which have gone up from this month,” he said.

Mr. Aggarwal said the company was hopeful of the demand for commercial vehicles (CVs) reviving from September onwards.

“Because of the pre-buying happening in the fourth quarter, the demand would be down in the April-June period. As the monsoon kicks in, the CV demand would improve and the industry would be in a better situation from September,” he said.

Mr. Aggarwal also said the company would be in a better placed to handle the BS VI transition compared with its peers. The company has gained from its experience of supplying Euro VI engines manufactured at its facility in Pithampur, near Indore, to the Volvo Group in Europe and Asia for the last six years, which would help in making BS VI trucks, he added.

‘Rising investments’

Mr. Aggarwal said usually the firm invests ₹500 crore every year and it has gone up to ₹600 crore this financial year, which includes a new unit in Bhopal, new engines and product series along with BS VI work.

Admitting that BS VI trucks would raise the cost of ownership, he said fuel efficiency and productivity improvements brought in through the new technology would be the firm’s key value proposition. “Fuel accounts for 40-50% of the total ownership and our fuel efficiency would help the customer bring down total ownership cost by 10%,” said Mr. Aggarwal said.

Brokerage Motilal Oswal said it expects BS VI-related cost inflation to be 10-13% for medium and heavy commercial vehicles.However, the research firm expects limited pre-buying in the CV segment due to fleet operators carrying 30-40% excess capacity.

In a research note, Motilal Oswal pointed out that there was hardly any pre-buying during the BS IV transition in the first half of calendar year 2017.

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Printable version | Feb 19, 2020 12:50:51 AM |

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