CV and tractor sales growth slips into slow lane

However, the ongoing decrease in demand has not affected passenger vehicle sales.

Published: 05th July 2019 10:02 AM  |   Last Updated: 05th July 2019 10:02 AM   |  A+A-

Swaraj Tractor

Swaraj Tractor|

Express News Service

The current slowdown in the Indian automobile industry has not been limited to just passenger vehicles and two-wheelers but has also reduced demand for commercial vehicles (CVs) and tractors. Sale of commercial vehicles, after clocking high double-digit growth in the first half of FY 2019, has subsequently fallen into the slow lane and is unlikely to register double-digit growth this fiscal.

Sale of CVs during the April-May period in the domestic market fell by 8.05 per cent to 137,527 units compared to 149,566 units sold in the same period last fiscal year. Sales figures are expected to be similar for the month of June too since all three major players have reported falling demand.

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Tata Motors’ domestic CV sales stood at 35,722 units in June, registering a drop of 7 per cent as against 38,560 units sold in the same period last fiscal. Further, the number two player — Ashok Leyland — saw total domestic sales come in at 12,085 units in the last month as compared to 14,091 units in June 2018, down by 14 per cent.

Volvo Eicher also witnessed a decline of 24.7 per cent in domestic sales at 4,136 units. “Both Medium and & Heavy Commercial Vehicle (M&HCV) and the Small Commercial Vehicle (SCV) segment have been hit by poor consumer sentiments, falling freight rates and difficulty of funding from NBFCs with a respective decline of 19 per cent and 10 per cent,” said Girish Wagh, president, CV Business, Tata Motors.

According to ratings agency ICRA, the sale of CVs in the domestic market slowed down over the latter half of FY 2019-20, reeling under multiple headwinds which have continued into the current fiscal. It said in its note that it expects the CV industry to grow in the range of 7-9 per cent during FY 2019-2020 on the back of pre-buying of BS-IV vehicles before the implementation of new BS-VI emission norms in April next year. These are expected to make vehicles more expensive by 10-12 per cent. However, its outlook for FY 2020-2021 remains muted, especially in the absence of visibility on likely implementation of a new scrappage policy.

The sale of tractors meanwhile, widely dependent on the monsoon, has gone down in recent months due to lower Rabi sowing and subdued farm sentiments. Further, an uneven monsoon forecast is likely to curtail the growth which this segment has seen in the last three years.

Mahindra & Mahindra’s Farm Equipment Sector (FES) posted a 19 per cent drop in domestic sales at 31,879 units in June 2019. During Q1 of FY 2019-20, its total sales dropped by 14 per cent at 86,350 units compared to 100,784 units a year ago. “Tractor demand remained sluggish in June. We hope that the onset of monsoon and the upcoming Union Budget allocations to the rural and agri sectors will drive positive sentiment in the coming months,” said Rajesh Jejurikar, president, Farm Equipment Sector, Mahindra & Mahindra.

Escorts’ domestic tractor sales too dropped 11.4 per cent year-on-year to 8,648 units in June. Its total sales declined 14.1 per cent to 21,051 tractors for the quarter ended June 2019 as against 24,494 tractors sold in the same quarter last year.

According to data from the Tractor Manufacturers Association (TMA), tractor sales in FY 2018-19 grew by 10.24 per cent as compared to 20.52 per cent and 15.74 per cent in FY 2017-18 and FY 2016-17 respectively. On a yearly basis, the growth rate was almost halved in FY 2018-19 over FY 2017-18.

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