Domestic commercial vehicle sales, one of the primary indicators of how an economy is shaping up, have recorded sharp declines in volumes over the first two months of the financial year. While the entire segment saw a 6 per cent fall in sales in April compared to the same month a year ago, May sales data from top commercial vehicle manufacturers show that there has been little improvement.
For instance, India’s largest commercial vehicle maker by volume, Tata Motors, disclosed earlier this week that domestic sales have fallen a whopping 20 per cent in May over the same month last year. In April, Tata Motors had recorded an 18 per cent fall in total sales in the domestic market. Others like Mahindra & Mahindra and VE Commercial Vehicles, which sells the Eicher brand, have not done well either. The exception remains Ashok Leyland, which was the sole major CV manufacturer that has reported positive sales growth during May.
Several factors have combined to hit CV demand over the last few months. In April, ICRA Ratings had noted that “the adverse impact of tightening financing environment following the liquidity crunch, surplus capacity created through revised axle load norms and viability pressure for SFOs because of higher fuel cost, weak freight rates collectively impacted CV demand”.
Over April and May, the decline in demand only seems to have worsened. To make matters worse, the medium and heavy commercial vehicles segment, the backbone of the CV industry have been the worst hit. “M&HCV sales have taken the maximum hit, declining by 38 percent, at 7,683 units, essentially due to higher capacity after increased axle load, not yet matched by commensurate freight growth,” said Girish Wagh, president, Commercial Vehicles Business Unit, Tata Motors. Mahindra & Mahindra and Ashok Leyland too have seen sales fall sharply in this segment. The former recorded a whopping 45 per cent decline in May while the latter saw a 4 per cent fall.
Analysts note that this could be a reflection of the overall slowdown in consumption activity in the Indian economy, which recorded one of the worst quarters in years in January-March 2019, while growth projections for the current financial year have been revised downward. Even truck rentals have seen a steady decline over the last few months. According to the Indian Foundation of Transport Research and Training (IFTRTT), May 2019 witnessed a mild decline of 1-1.5 per cent across 75 key routes.
However, industry executives do expect sales growth to improve going forward, now that it is clear that a stable government is at the Centre. “Now, with a stable government at the centre and the forecast of a near-normal monsoon, we hope to see an improvement in consumer sentiment over the next few months,” said Rajan Wadhera, president, Automotive Sector, Mahindra & Mahindra.