Analysts, industry players see CV sales hitting a record high in FY18

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Mumbai | Updated: March 7, 2018 3:20:26 PM

Previous high in the segment was recorded in FY12 with sales of 8,09,499 units

CV sales, MHCV, Crisil Research, VE Commercial Vehicles, goods & services tax, BS VISales of commercial vehicles continue to remain strong on overloading restrictions imposed by many states and an uptick in infrastructure and mining activity in the country.

The current fiscal could well be the best for commercial vehicle sales ever. The previous highest sales were recorded in FY12, when the industry sold 8,09,499 units. With a volume of 6,59,997 units recorded till January-end, and a recent monthly run-rate of over 80,000 units (82,362 in December and 85,660 in January), analysts and industry players are confident of setting a new sales record. Traditionally, February and March see higher sales volumes than January, and by that reasoning, the new high seems almost certain.

Binaifer Jehani, director, Crisil Research, says she expects the momentum from January to continue for both light commercial vehicles (LCVs) and medium and heavy commercial vehicles (MHCVs) during February and March. She added, “CV sales in FY18 is expected to surpass eight lakh units which was last seen in FY12. Basis the expectation for growth in February and March, we expect this mark to be breached with ease.”

While the first three months of the current fiscal recorded a 9% decline in sales of commercial vehicles in the country, the latter part of the fiscal witnessed volumes grow by 30%, supported by factors like a pick-up in infrastructure development activity, a positive base effect (owing to demonetisation impact in late 2016) and regulatory actions. After scaling to a high in FY12, sales of CVs decelerated, dipping by 2% in FY13 and even more sharply, by 20% in FY14. According to rating agency Crisil, volumes of CVs were impacted between fiscal year 2013 and 2016 due to a shift to higher tonnage vehicles in the country, which saw buyers opting for a few large trucks in place of more lower capacity ones.

Sales of commercial vehicles continue to remain strong on overloading restrictions imposed by many states and an uptick in infrastructure and mining activity in the country. Girish Wagh, head – commercial vehicle business unit, Tata Motors, suggests that there is also a trickle down affect of the rise in heavy trucks on smaller commercial vehicles. He adds that the demand for trucks for Tata Motors usually remains very high during the last quarter of every fiscal. However, this year, the company witnessed high demand starting in the second quarter itself, which has led to all of the company’s plants running at 90-95% capacity.

Shyam Maller, executive vice-president — sales & marketing, at truck maker VE Commercial Vehicles (VECV), a joint venture between the Volvo Group and Eicher Motors, says that CV sales for them are going to continue growing, thanks to the e-commerce boom.
He expects February to be a better month than January for the company in terms of volumes. “Most of us were unprepared for the industry to bounce back so quickly. We are all rushing back to the drawing boards, to ensure we don’t lose out on the opportunity,” he added. VECV has sold 43,000 units of CVs till January-end, in this fiscal.

Maller also suggests that implementation of the goods & services tax (GST) has given a big boost to CV sales. “Post-GST what has happened is that a large number of companies are realigning their distribution networks. Earlier in the VAT regime almost every state used to have a warehouse because one state’s VAT was different from the other. Now, in the new scheme of things, most companies are trying to create a larger warehouse. This has had a huge impact on the way goods are moved,” he said.

Wagh says that CV sales may continue to grow for the coming two financial years. He said, “Atleast for the next two financial years we may see an uptick in commercial vehicle sales. This is because at the start of financial year ending in 2020, we will see a price hike as the country migrates to BS VI (Bharat Stage 6) fuel.”

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