Truck discounts hit record as sales slow

Jul 26 2013, 11:52 IST
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SummaryDiscounts on commercial vehicles from Tata Motors, Ashok Leyland and Eicher have touched an all-time high.

As they slug it out in a tough market, discounts on commercial vehicles from Tata Motors, Ashok Leyland and Eicher have touched an all-time high of up to 14%. Mohan Himatsingka, president of Federation of Automobile Dealers Association and a top Tata Motors dealer said discounts on 16-tonne payload trucks priced around R18 lakh are now touching R2.5 lakh in some southern states. This is higher than last year’s discounts which were around R80,000-1 lakh. “Dealers are not making money under these circumstances,” he added.

CV sales are in a slump with the industry operating at just a third of its installed production capacity of around 9 lakh units; while Ashok Leyland reported a loss of R142 crore in Q1FY14, Tata Motors' domestic business has also been under pressure for a while — in Q4FY13, it had posted a R458-crore loss.

Yaresh Kothari, auto analyst with Angel Broking, agreed that discounts were at record levels at R2-2.5 lakh for Tata Motors and up to R1.7 lakh for Ashok Leyland, while another analyst with a foreign brokerage added: “Despite inventories being not as high as before, discounts are at a high. It has become a tactical thing to maintain market share.”

Led by Ashok Leyland, which cut production by half to just 4,080 units in June, the entire CV industry has collectively reduced output for the first time in one month by 15% because of a sharp fall in demand on the back of slowing economic growth and rising diesel prices. Manufacturers are also pruning production of light commercial vehicles (LCVs), which had been selling well till last year.

Vinod K Dasari, MD, Ashok Leyland, said the June production cut was towards inventory reduction and while no permanent workmen have been suspended yet, it is open to do so if the need arises. “Towards rationalising production, the company has reduced the number of working days to a five-day week across all manufacturing plants,” he added.

Tata Motors has cut output by 10.5% to 27,670 units, Eicher by 15.6% to 3,039 units and Mahindra & Mahindra by 7% to 12,488 units. With these cuts coming on last fiscal's low base, capacity utilisation is now 30-40% for most players, according to analysts. Tata Motors has an annual installed CV capacity of 8.24 lakh units across plants in Jamshedpur, Lucknow, Pantnagar and Dharwad, plus an additional 5.49-lakh-unit capacity in Pune shared between CVs and its passenger vehicle range. Ashok

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