The already buoyant commercial vehicle (CV) sales could get a big leg-up with the government’s move to phase out vehicles more than 15 years old.
The already buoyant commercial vehicle (CV) sales could get a big leg-up with the government’s move to phase out vehicles more than 15 years old, with industry players estimating an incremental demand of about 700,000 units for medium & heavy vehicles (M&HCV) over the next 3 years.
This when viewed in the context of present annual M&HCV sales of just under 3,50,000 units estimated for the current fiscal (294,553 units were sold in the period from April to February, 2017), represents a near 67% increase in annual demand over the next three years.
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Gopal Mahadevan, CFO, Ashok Leyland, said the introduction of the scrappage policy will have a very positive impact on the commercial vehicle industry, estimating that it will translate into additional demand for 6-7 lakh M&HCVs over the next 2-3 years. He added, “Under the policy, the government intends to incentivise scrapping of 15-year-old vehicles, which is a good incentive for medium and large fleet operators to replace their depreciating fleet.”
The move is part of the Voluntary Vehicle fleet Modernisation Programme (V-VMP) policy which in its first phase aims at scrapping 15-year-old commercial vehicles. The policy recently received a nod from the finance ministry, and it has now been sent to the GST Council for final approval. It is expected to get final approval by the end of March.
Vinod Aggarwal, CEO, Volvo Eicher Commercial Vehicles, said he expects the GST Council to offer a sizeable incentive to fleet operators to buy brand new trucks. In anticipation of an increase in demand for new trucks, Aggarwal said the company is making plans to increase capacity, and will take a call sometime in the next three months. He added that the industry has already started to make arrangements to meet the rise in demand that may come from the policy.