The Centre?s second stimulus package, which specially focused on boosting commercial vehicles sales, seems to have worked. After two months of negative growth, January brought pleasant tidings for commercial vehicle (CV) players, with their sales growing by 23-44% over December. The next few months should also see higher sales from the Centre?s decision to allow states to buy buses for urban transport under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM).
The second fiscal stimulus package announced on January 2 had bestowed a sweetener of 50% accelerated depreciation for CVs bought between January and March 2009, to goad transporters to expedite their purchases. The Centre has recently brokered a line of credit of Rs 5,000 crore wherein public sector banks would refinance non-banking financial companies on their commercial vehicle loans.
In line with another measure in the stimulus package, the Cabinet committee on economic affairs on Thursday modified the guidelines on urban infrastructure and governance under JNNURM to facilitate the financing of urban transport, including purchase of buses by states. So far, the JNNURM scheme allowed states to use funds only for urban infrastructure projects like roads, bridges and houses.
?We are now enabling purchase of buses for urban transport under JNNURM for up to June 30, 2009,? home minister P Chidambaram said. ?This is part of the Rs 50,000-crore stimulus package announced by the government,? he said. The state of Delhi has already placed orders for new buses, while Punjab has announced plans to phase out its ageing bus fleet.
Over the last fortnight, the Delhi Transport Corporation (DTC) has placed an order for 1,625 ultra-low floor buses with Tata Motors for Rs 2,200 crore and 875 high-end ultra-low entry buses with Ashok Leyland (worth Rs 480 crore). For the latter, DTC?s order is the single largest from a state corporation. The company will start supplying 350 AC and 525 non-AC buses to DTC from mid-year.
For the country?s largest commercial vehicle maker, Tata Motors, January sales touched 17,373 units, rising 23.6% over its December 2008 sales. Ashok Leyland, the second largest CV player, saw the highest sales in three months in January, which soared 44.1% over December.
Even Eicher Motors, a relatively small player in the segment, saw it sales of commercial vehicles going up from 661 units in November and 748 units in December to 940 units in January. This meant a growth of 25.7% in January over December.
Analysts are still cautious, though. ?There is a possibility that sales might have picked up as a result of companies maintaining minimum inventory at the dealers’ end. Inventories had come down after companies had temporarily shut down plants in November and December. The real picture would be clear in next few months and the demand will depend on whether the economy, and consequently the transport activity, picks up or not,? says an official at a Mumbai-based brokerage firm.
?Faint signals of the impact of the financial stimulus announced by the government, particularly for commercial vehicles, is being noticed. However, the automobile market continues to be under the grips of a credit squeeze and high interest rates. Consequently, sales in the domestic market in January are still less that what it was in January last year,? Tata Motors’ said in a statement.