M&HCV June growth lowest since 2014 end - The Financial Express

M&HCV June growth lowest since 2014 end

The medium and heavy commercial vehicle (M&HCV) segment in June witnessed a volume growth of 1.9% y-o-y at 22,184 units which is the lowest since the volumes in the segment started to recover at the end of 2014.

By: | Updated: July 12, 2016 7:47 AM
diesel car ban, diesel vehicle ban, diesel car ban ncr, diesel car 2000cc ban According to analysts, demand for freight transportation has witnessed moderation which has hit demand for trucks. Some also point towards the 20% increase in diesel prices over the last one year with freight rates not increasing in tandem, as the cause for lower demand for new vehicles. (Reuters Photo)

The medium and heavy commercial vehicle (M&HCV) segment in June witnessed a volume growth of 1.9% y-o-y at 22,184 units which is the lowest since the volumes in the segment started to recover at the end of 2014.

On the other hand the light commercial vehicles segment continued to be on the path of recovery with a volume growth of 8.31% y-o-y to 30,860 units, data released by Society of Indian Automobile Manufacturers showed.

According to analysts, demand for freight transportation has witnessed moderation which has hit demand for trucks. Some also point towards the 20% increase in diesel prices over the last one year with freight rates not increasing in tandem, as the cause for lower demand for new vehicles.

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The biggest player in the market Tata Motors saw its volumes in the segment decline 9.3% y-o-y by 12,147 units while the same for Ashok Leyland increased by only 8% y-o-y to 8,685 units during the same time.

The M&HCV volumes in June were partly impacted as fleet owners wanted to buy the vehicles in the first two months of the fiscal due to expectations of price increase by manufacturers and imposition of 1% transaction tax in June.

“We believe that these are early signs of a slowdown and industry volumes could weaken significantly if replacement demand comes off. We note that industry volumes over the past couple of years was supported largely by replacement demand as there was only moderate 7-8 % growth in underlying freight demand,” said Hitesh Goel and Nishit Jalan of Kotak Institutional Equities.

Ashok Leyland, the second biggest manufacturer of trucks in the domestic market lost volumes in the southern states of the country due the election in Tamil Nadu and non registration of of BS III vehicles in Andhra Pradesh and Tamil Nadu.

“The M&HCV segment will see some moderation in volumes in the near term due to lack of availability of freight from agriculture and the late arrival of monsoon. Volumes will start recovering in the second half of the fiscal as fleet owners will look to replace their old trucks with the new BS IV vehicles and increasing activity in the mining and infrastructure sector,” said an analyst with an institutional brokerage firm.

The light commercial vehicle segment continues to grow although on a very low base as aa result of the hub and spoke model. With the increase in economic activity the need for last mile transportation also increases which has led to the increase in the the LCV volumes.

Tata Motors saw its volumes increased by 14% y-o-y to 16,017 units in June. Mahindra and Mahindra also saw its volumes increase by 5.9 % y o-y to 13,023 units during the same time.

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