Tough Time Continues For Commercial Vehicle Segment

India’s commercial vehicle (CV) segment, which is having a rough run due to slowdown in economic activity and environment concerns, continues to post negative month on month growth and chances of a near recovery of medium and heavy commercial vehicle (M&HCV) division looks bleak.

During the month of May, major manufacturers posted double digit decline in sales. Tata Motors' CV domestic sales were down 13 percent at 23,606 units in May and the company said market continues to remain weak and demand has still not picked up. There are early signs of retails of BS-IV vehicles but it has still been slow.

Overall sales of Tata Motors' M&HCV trucks were at 6,522 units in May 2017, a decline of 40 percent when compared to May 2016 sales. “The sale in M&HCV was affected primarily due to severe global supply constraints of fuel injection pumps for BS-IV engines,” the company said.

Second largest CV player Ashok Leyland’s sales were down by 8 per cent. Its medium and heavy commercial vehicle division de-grew by 18 per cent on the back of pre-buying following the enforcement of the BS-IV emission norms from 1 April, 2017.

However, its light commercial vehicles (LCVs) continue to bring volume for the company, posting a 22 per cent growth in May 2017 compared to the same month in 2016. Going forward, demand for LCVs is expected to grow more as it will receive a big boost from goods and services tax.

The M&HCV division will continue to see negative demand for some months due to abundant pre buy back that took place during BS-IV emission transition period.

According to India Ratings and Research (Ind-Ra), the Medium and Heavy Commercial Vehicle (M&HCV) sector has witnessed a steep as well as consistent decline in sales since 2011. In April 2017, this sector posted a downfall of 55 per cent in the medium CV sector and 73 per cent decline in the heavy CV category, compared to the same period in 2016.

The reason for this according to Ind-Ra is that potential buyers wish to wait and watch the new vehicles being sold due to two key reasons. One being the performance of the new BS-IV vehicles and secondly assessing any improvement in the industrial performance.

The new emission norms compliance will bring up the cost of any M&HCV vehicle by up to 15 percent, on an average, which could also add to the delay in purchasing a vehicle from this category.