M&HCV sales fall up to 30% in December

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Published: January 4, 2019 2:24 AM

This is partly on account of high base of last year, when there was some pre-buying ahead of mandatory AC/blower in cabins.

While the companies’ management attribute the slowdown in demand to liquidity crunch, weak operator economics like rising fuel prices, higher axle load norms, a CAGR of 4% over a two year period suggests weakened demand, according to a recent Jefferies report.

The medium and heavy commercial vehicle (M&HCV) segment continued to be on a downward spiral for the second consecutive month in December, declining 27-30% year-on-year at 27,620 units across major companies like Tata Motors, M&M and Ashok Leyland.

While the companies’ management attribute the slowdown in demand to liquidity crunch, weak operator economics like rising fuel prices, higher axle load norms, a CAGR of 4% over a two year period suggests weakened demand, according to a recent Jefferies report.

While M&HCV volumes for December stood at 27,620 units, down 25% y-o-y, the light commercial vehicle segment did comparatively well at 44,408 units, up 6% from the last year. This is partly on account of high base of last year, when there was some pre-buying ahead of mandatory AC/blower in cabins.

 

Umesh Revankar, managing director, Shriram Transport Finance Company, said, “While axle load norms is one of the reasons for the slowdown in demand, according to me, major factor is the liquidity crunch that has hit the real estate sector. With the slowdown of real estate and infrastructure, steel, cement and sand demand has come down too. These are the bulk materials and slowdown in their movement automatically drags down the vehicle utility. As a result, idleness goes up due to which fresh vehicle purchase stops, albeit temporarily”.

The commercial vehicle segment was faring well until October with M&HCV growing at 12% y-o-y at 27,571 units and LCV growing at 32% y-o-y at 55,593 units. However, in November, the growth took a reverse trend with M&HCV de-growing at 19% y-o-y and LCV at 18% y-o-y.

The tipper segment was relatively unaffected on the back of road construction, affordable housing, irrigation projects and government spending on infrastructure projects. “Infrastructure slowed in November due to elections in Rajasthan, MP. Furthermore, there was farm distress in Maharashtra, MP and rural central India which impacted the growth,” Revankar added.
While the market giant Tata Motors’ M&HCV sales declined 27% y-o-y, Ashok Leyland is the worst affected with its volumes going down 29% y-o-y.

M&HCV’s are affected the most because the bulk materials are transported only on M&HCVs. Furthermore, Revankar believes that this will not have any impact on freight rates because the infrastructure might improve post January 15, since January is the harvesting time.

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