By Pritish Raj
Sales of commercial vehicles fell around 40% year-on-year in August, hit by slowdown in the economy, revised axle load norms and limited finance options. Ashok Leyland’s chief operating officer Anuj Kathuria, in an interaction with FE’s Pritish Raj, says demand during September should improve as depreciation for the full year can be claimed. He further said pre-buying is yet to happen and if GST reduction happens at the same time, it will further push sales. Excerpts:
Speculations are rife about the GST cut on vehicles. How important is it for commercial vehicles?
The cut in the GST rate will definitely improve sentiments. But is depends on the segment. For instance, for people who are on the forward charge, they can get a set-off on the input credit. So, it may not be that big an impact. But for people on the reverse charge do not get the entire set off, therefore for them the cost of acquisition will come down.
August was the worst month for CV sales. In a scenario where there will be no rate cut, how long do you think will the slowdown last?
Some of the customers may have deferred purchases, but September is a month when if you buy, you get the depreciation for the full year, and now even the depreciation bracket has been enhanced. Demand in September should be better than August, with or without the cut. Construction equipment, which was at an all-time low in August, should do better because now the monsoons are almost over. With the announcement of more projects, thing should start looking up. The distribution segment looked bad in August because there was some stock correction which everyone did, but retails were better.
How are you managing your inventory and workforce when retails are not picking as much as it is required?
Everybody in the industry has a flexible manufacturing set-up where we engage a judicious mix of permanent and temporary workforce as the industry is cyclical in nature. Having said that, we do not do knee-jerk reaction in layoffs. We take a calculated judgement and we have been working on it right from March. We have brought down the inventory to a much lower level and this much is required to do in month-to-month sales.
But lay offs have happened at Ashok Leyland too as there were no-production days.
Yes, layoffs have happened, but of temporary workers. I don’t have a number at hand.
Many say the revised axle norm still has a lingering impact. Has it impacted new purchases at Ashok Leyland?
I don’t think there is a direct correlation as such, but what is coming out in the long haul is that the capacity that had increased because of the revised load norms is still being absorbed. That is actually dampening the demand to a certain extent.
CVs do not have a festive season advantage to that extent. How and by when do you think the demand will revive?
The construction segment is purely dependent on mobilisation of infra projects, and that today is almost close to 20% of total vehicles sold. Distribution is a growing segment and it is actually one-fourth of my sales. So, 50% of my volumes come from these two. Long haul is where things will take some time, but pre-buying is yet to happen. So Q3 should see some pre-buying and if by that time GST reduction happens, it will even push it better.
Financing has been a major concern for all segments, but CVs took a major hit. What are you doing to combat the crunch?
What I understand is that in banks and NBFCs, fund availability is not a problem, but lending is. Norms have been tightened and within NBFCs rates may also have gone up. I think it is more detrimental for first-time buyers. For fleet operators, getting finance is not a problem if their records are clean.