Bus sales fall 10.4% in 8 mths as grants end

Bus sales have fallen between April and November, 2011, first time in the past two years, as the Union government grant to states for bus purchase ended. The sales fell 10.4% in eight months, compared to the same period a year ago, following an 18% growth in the past two years as customers purchased buses last year anticipating new emission norms.

Bus makers sold 28,494 vehicles in medium and heavy commercial category, higher than 7.5 tonne between April and November 2011 as against 31,803 units in the same period previous year, data released by the Society of Indian Automobile Manufacturers (Siam) on December 8 shows.

?Bus makers are looking not at building inventory levels and just produce enough to meet the demand in the market,? said VG Ramakrishnan, senior director, transportation and logistics South Asia, Middle East and North Africa at consulting firm Frost & Sullivan.

?The low demand of buses currently will be offset by strong performance of trucks.? Production of MHCV buses for April- November has been down 11.05% to 32,540 units as against 36,582 units produced a year ago.

Tata Motors, Ashok Leyland and Volvo Buses have been making buses matching market demand. However, lower demand will offset the higher demand from trucks. Companies sold 1,85151 units between April and November, a 13.24% rise from the same period previous year.

?Bus sales typically make up anywhere between 15-18% of the total CV sales in India and have much low margins compared to trucks since most of them are sold to government institutions,? said Amit Kasat, an auto analyst with Standard Chartered equity research, broker.

Deliveries to state transport units (STUs) constitute around 40-45% of MHCVs buses. The JNNURM scheme floated by the government during 2009 to keep bus segment afloat in times of recession had created demand for 15,000 buses for 60 select city municipal corporations.

?Moreover, advance purchases by private operators on new emission norms that set in October 2010 and their inability to fully pass on increased vehicle and interest rate costs through fares too impacted the demand for the MHCV buses,? said Sridhar Chandrasekhar, head, Crisil Research.

Bus exports have also come down because many countries have cut down their need for new buses.?Largely exports are in the MHCV bus segment and are government-to-government sale,? Ramakrishnan of Frost & Sullivan said.