NEW DELHI: Vinod Aggarwal, MD & CEO of Volvo Eicher Commercial Vehicles (VECV) expects demand for commercial vehicles to recover in the final quarter of FY21 driven by a rise in infrastructure activities and pent-up replacement demand.
“Every month is doing better the previous month. We expect very good demand for CVs Q3 and Q4 will surely be better than Q3. In Q4, we also expect GDP to be positive. The worst, which was 23.9 per cent decline in GDP, is over now,” Aggarwal told this publication.
CV sales fell 85 per cent in Q1 to just 31,636 units due to the Covid 19-driven lockdown. However, in recent months, CV makers have seen a strong improvement in sales, especially for light commercial vehicles. “Government is focused on upscaling infra activity and this will generate demand for CVs,” Aggarwal said. He added that there is also huge pent-up demand from fleet operators to replace older vehicles with new models.
“If you look at the industry, sales have dropped by 40 per cent in FY19-20. It means that replacements were very less. Additionally, Axle norms led to transporters increasing carrying capacity of trucks. Now productivity is low and they need to be replaced,” he said. According to him, sectors which are linked to the rural economy and e-commerce sector will also drive demand.
However, liquidity will continue to remain a major concern for the sector. The moratorium on loans has now ended and it would be an uphill task for fleet operators to pay EMIs. Since the collapse of IL&FS in 2018, non-banking financial institutions have also become very wary of financing the auto sector. “Financers definitely will be very careful. At the end of the day, they are accountable to the shareholders. But, there are players whose track record is good,” Aggarwal pointed out.