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Truck makers see a small recovery this fiscal

Saturday, 19 April 2014 - 7:00am IST | Place: Mumbai | Agency: dna
Pin hopes on infra push under new govt and replacement of ageing fleet

The new financial year has failed to cheer to commercial vehicle (CV) makers as recovery still eludes the industry.

CV manufacturers, which are reeling under two-year long recession, hope to clock at least a marginal growth this year riding new infra projects under the new government and replacement of ageing fleet.

From its peak in 2011-12, overall CV sales have seen a drop of almost 22% over the past two fiscals, as per the data provided by Society of Indian Automobile Manufacturers (SIAM). The biggest slump was witnessed in the medium & heavy commercial vehicle segment, which saw a decline of 42.55% from its peak in fiscal 2012.

Owning to the slowdown in industrial activities, small and big truck operators have shied away from buying new trucks.

Slowing factory output, ban on mining, and lack of new infrastructure projects have led to idle capacities in the system.

Financiers, too, have remained cautious, especially in lending to small operators owing to rising delinquencies.

In the new financial year, a section of the industry is hopeful of coming out of its longest slowdown. "We have seen bad times earlier, but this is probably the longest," said a north-based Tata Motors dealer.

"June quarter is generally slow for CV sales due to rains. Hence, we will continue to witness a slowdown in the first half. However, we expect volumes to improve post elections, in the second half of the year," said Kailash Gupta, managing director of Commercial Automobiles Ltd, a Tata Motors dealer in Jabalpur, Madhya Pradesh.

Considering the low base, industry experts expect single-digit growth in the current fiscal.

"The growth may come due to two aspects – one is the base effect and second is the replacement of ageing fleet," said Subrata Ray, senior VP at ratings agency Icra.

A spokesperson of Tata Motors, the biggest CV manufacturer in India, said the biggest concern for the industry is the challenging macro-economic environment in the country.

"It is difficult to predict exact macroeconomics, as this is not really an automotive issue. Much will depend on future trends for inflation, infrastructure growth, the investment climate in the country, fuel prices, etc as well as the trends in financial markets," said the spokesperson.

Most truck-makers incurred losses last year owing to heavy discounts in an already depressed market.

Suppliers too are suffering.

Eicher Motors, the only profit-making CV manufacturer, is however optimistic of small recovery.

"We are optimistic. There is a shortage of trucks on certain routes, also freight rates have improved. Sentiments should improve, irrespective of any government," said Vinod Aggarwal, CEO of Volvo Eicher Commercial Vehicle.

"Some heavy duty segments like tractors, multi-axles have already started picking up," he said.

Harish Sheth, managing director of Setco Automotive, said, "The industry has bottomed out. Lower base will have an impact on the numbers this year, leading to a marginal growth. However, the actual growth will come only in the next fiscal."

The Tata Motors spokesperson, however, refused to make a prediction about the recovery. "It is still too early to predict what is to come – while we do hope that a stabilised government with clarity across policies of investment, infrastructure development, taxation, etc will definitely help, we cannot realistically expect these changes for at least a quarter or so after the new government takes charge."

"As such, we hope for a better second half of this financial year but we will have to wait and watch as it will depend on future policies as well as global macroeconomic trends," he said.




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