As lockdowns across India started to ease last year and economic growth started picking up pace month-on-month, the commercial vehicle (CV) goods carrier segment —hit among the hardest within the automotive space — too started growing. However, within the CV segment, sales of light commercial vehicles (LCVs) are picking up faster than those of medium & heavy commercial vehicles (M&HCVs), according to data by the Society of Indian Automobile Manufacturers (SIAM) and companies. For instance, in August and September 2020, while sales of Tata Motors’ M&HCVs contracted 29% year-on-year, sales of its intermediate & LCVs (I&LCVs) contracted just 20%. When the turnaround started October 2020 onwards, the company’s M&HCVs have grown about 15% (Oct ’20 to Feb ’21; to 36,296 units from 31,553 units a year earlier). But I&LCVs grew about 24% (from 18,916 units to 23,509 units).
Ashok Leyland sold 27,119 M&HCV goods carriers from October 2020 to February 2021, a growth of about 34% over 20,139 units in the same period a year earlier, even as its LCVs grew at an almost similar rate, to 27,173 units in the October 2020 to February 2021 period from 20,342 units a year earlier. But if you consider the company’s February 2020 to February 2021 sales growth over a year earlier, the company’s M&HCVs contracted 34.5%, even as LCVs fared better at just 8.54% contraction.
According to SIAM data (April-December 2020), M&HCV goods carriers contracted 47.11% (from 1,46,682 units to 77,576 units), but LCV goods carriers contracted just 24.65% (from 3,59,162 units to 2,70,623 units). Analysts argue that increased e-commerce activity—which can be directly attributed to the pandemic-induced lockdown — is leading to a spurt in sales of ‘more affordable’ goods carriers. Som Kapoor, partner, automotive sector, EY India, said there appears to be a strong correlation between e-commerce activity and LCV sales. “LCVs are used for last-mile connectivity — the transportation of goods across the country follows a hub-and-spoke model, wherein goods arrive at certain key hubs through M&HCVs, and are transported to surrounding areas in LCVs. Post-lockdown, e-commerce activity has picked up substantially. This could be one of the reasons sales of LCVs are rising faster than those of M&HCVs,” he said.
On M&HCVs, he added that their sales are directly correlated to increase in GDP. “While GDP growth is picking up, it may be a possibility that buyers/operators want to conserve capital at this stage, so they may delay new vehicle purchases,” Kapoor said. Preetam Mohan Singh, senior vice-president, automotive, Praxis Global Alliance, added that buyers/operators of heavy-duty vehicles may be more reluctant on new purchase right now due to comparatively heavy investments in such vehicles, and are in a ‘wait and watch’ mode of scrappage policy clarity/rules/SoPs, etc, which will hopefully be released by October 1, 2021. “LCVs are a relatively more economical mode of transferring goods. Sales of LCVs are mainly driven by the movement of agricultural produce (the Kharif crop last year was good), FMCG and dairy products, increased rural demand — and further consolidated by the last-mile delivery requirements of online retailers,” he said.
Madan Sabnavis, chief economist at CARE Ratings, also attributed rising LCV sales to e-commerce activity. He said that a lot of CVs are owned by small-time operators and SME operators, and they are under pressure due to economic slowdown and uncertainty, so they may more readily go in for a low-value purchase (such as LCVs) instead of high-value purchase (M&HCVs). “Within M&HCVs, there is expected to be greater demand for second-hand vehicles instead of new vehicles,” he said.
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