Commercial vehicles (CVs) sales, a key indicator of economic activity of the country, fell nearly 39 per cent in August 2019 to 51,897 units against 84,668 units sold in the same month last year. The sharp decline in sales comes at a time when India’s GDP in the first quarter of FY 2020 came down to a 24-quarter low of 5 per cent.
The fall was particularly high for medium and heavy M&HCV where domestic sales fell by a whopping 54.3 per cent. Light CVs sales shrank by 28.21 per cent.
“Subdued demand sentiments due to poor freight availability, lower freight rates and a general slowdown in the economy continued to hamper the CV demand,” said Girish Wagh, president, CV business unit, Tata Motors. “System stock reduction through retail focus and aligning production will continue to be our approach, while cautiously monitoring the market, in these challenging times,” he added.
Owing to the slowdown, Ashok Leyland, one of India’s top CV-makers is going for no-production days across its five plants this month. “We write to inform you that the following are the non-working days at our various plant locations during September 2019 due to continued weak demand for our products,” said Ashok Leyland in a regulatory filing on Monday.
Ashok Leyland reported a 28 per cent decline in total sales at 10,927 vehicles in July against 15,199 units in July last year. Similarly, market leader Tata Motors reported 45 per cent decline in its August CV sales at 21,824 units. Analysts said sales of trucks were dragged down in August by top manufacturers — Tata Motors and Ashok Leyland, which together sell more than seven out of every 10 trucks sold in the country.
The government’s offer of higher depreciation for vehicles may not help sales of CVs analysts feel.
The category of truck owners which qualifies for extra depreciation from 15 to 30 per cent is very small and could of maximum to 7-10 per cent of total truck owners,” said SP Singh, senior fellow, Indian Foundation of Transport Research and Training. Further, manufacturing activity in India slumped to a 15-month low in August as sales slowed, forcing factories to cut back productions, according to a survey. The IHS Markit India Manufacturing PMI fell to 51.4 in August from 52.5 in July, its lowest since May 2018.
According to Moody’s Analytics credit outlook report, the slowdown in the Indian economy is credit negative for auto asset-backed securities backed by CV loans as the performance of such loans is highly correlated to economic conditions.