17th October 2020
News source : ET Auto (15th October’20), Image source : Automotive manufacturing solutions
• At the beginning of 2020, the domestic commercial vehicle (CV) industry was all geared up to overcome two long years of sluggish sales with the pick-up in highway and fleet orders and new product launches. Unfortunately, the Coronavirus outbreak has dissipated this optimism. Now the industry is hoping for increased sales in November-December led by the release of government contracts and catching up of mining and construction activities.
• Within the CV space, medium and heavy commercial vehicle segments were the most hit by the pandemic-driven lockdown as the sales declined 70%-75% in the first half of the financial year 2020-2021. However, with the gradual re-opening of the economy, the upcoming festive season, and the uptick in corporate and agricultural activities, the industry leaders are expecting some improvement in sales in the second half of the financial year.
• Tata Motors, which reported a 29% decline in total CV sales in the second quarter, said factory-gate shipment improved each month. “Offtake was higher than retail, as we prepare for sequential improvement in retails in the coming months,” India’s largest M&HCV maker said in a statement. Retail sales of other prominent players like Mahindra & Mahindra and Ashok Leyland have also recovered, but in parts, as the economy has gradually started gaining strength.
• "New buying of trucks declined significantly in the first half, leaving most of the tiding-over burden to be borne by replacement orders. Now, with the opening up of business activity the replacement demand is only going to surge in the second half and not reduce which will propel the sales of trucks," Vinod Aggarwal, Managing Director and CEO, VECV told ETAuto.
• Most dealers ETAuto spoke with sounded positive, given the sequential recovery in demand, and stated that enquiries have been much higher, but conversion is still a matter of concern. Although they do not expect the demand to recover fully by the festive period, with the earlier than expected signs of a revival of CV financing and improvement in the supply chain, dealers are expecting a semi-turnaround in sales.
• As the CV industry is directly linked with the economy, the unexpected fall in GDP growth to -23.9% indicates that a full-fledged recovery in M&HCV sales is unlikely in the short-run. In general, the downcycle of M&HCV stretches for nine to ten quarters.
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