CV makers grapple with falling volumes; outlook remains grim

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SummaryThe commercial vehicle industry is facing challenging times. Despite heavy discounts and easy EMI schemes, the medium and heavy CV segment has reported a 20% decline in growth

The commercial vehicle industry is facing challenging times. Despite heavy discounts and easy EMI schemes, the medium and heavy CV segment has reported a 20% decline in growth in the first quarter of current fiscal to 49,750 units. This is in comparison to 62,300 units during the same period last year. Major players like Tatas and Ashok Leyland (ALL) reported declines of 11% and 26.5%, respectively, in the M&HCV category.

Despite a good monsoon and the government’s announcement of sprucing up infra investments during the year, analysts still see flattish or even negative growth in this segment for the whole fiscal. Demand is expected to pick up only in third quarter, or during the festive season.

The light commercial vehicle (LCV) segment is affected too. Both Tata Motors and ALL reported negative growth of 6.7% and 6%, respectively, in the LCV segment in the first quarter of the current fiscal. Ashok Leyland, which reported flat growth in the first two months of Q1, witnessed negative growth of 17.3% for the first time in June on its only LCV ‘Dost’. This is despite huge discounts and low EMIs that have failed to entice fleet owners, said SP Singh, senior fellow, Indian Foundation of Transport Research and Training, a research institute with a keen focus on the truck industry.

Yaresh Kothari, an analyst with Angel Broking, said that while the near-term environment continues to remain challenging for the sector, long-term structural growth drivers for the industry and easy availability of finance will remain intact.

According to the brokerage house, Tata Motors reported a 11.2% drop in its M&HCV segment for the quarter-ended June to 32,997 units compared to 37,151 units in the same period last fiscal. In the LCV segment, the company reported a decline of 6.7% to 83,500 units (89,483 units in Q1FY13). Similarly, Ashok Leyland reported a decline of 26.4% in the June quarter to 14,897 units as against 20,239 units sold in same quarter last fiscal while LCV ‘Dost’ reported a 5.8% decline in Q1 to 6,824 units as against 7,248 units sold in same quarter last fiscal.

Surjit Arora of Prabhudas Lilladher said: "This is a tough time for CV manufacturers. The situation is not expected to improve even in the next quarter (July-September). The lack of demand in freight, fall in rentals and a slow pick-up in industrial activity have forced fleet-owners to postpone their

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