Recovery eludes bus sales as schools, public transport remain shut

For a country that has a relatively low car and two-wheeler penetration and a low per capita income compared to several countries of the world, public transport has been nothing short of a lifeline. The Covid-19 outbreak has, however, suddenly shifted priorities. The fear of infection spreading in public transport has seen more people shunning it in favour of personal transportation.

A good indicator of the changing commuter behaviour is the sales number of auto companies. Though to some extent it is attributable to the inventory re-stocking at the dealerships ahead of the festive season and last year’s low base, personal segments including two-wheelers and cars have shown a smart recovery since May. The same cannot be said about vehicles deployed in public transportation including buses and three-wheelers.  

Sales data released by auto industry body Society of Indian Automobile Manufacturers (Siam) on Friday show passenger vehicles (PVs) sales have narrowed the year-on-year decline to 34 per cent in the first six months of the current fiscal. It has been led by a high double-digit growth in the last couple of months. Similarly, two-wheelers reported a decline of 38.28 per cent in the first six months. But in September, PVs and two-wheelers saw a year-on-year growth of 26.45 per cent and 11.64 per cent respectively.

The same recovery remains elusive for buses. Sales of heavy duty and light buses reported a steep decline of 95.31 per cent and 82.48 per cent respectively in the first half of the current year over the corresponding period (see chart).

Shuttered schools and institutions, and restricted movement within the city and from one city to another have been dragging down bus sales and they are expected to touch a decadal low by end of the current fiscal. Rating agency ICRA expects bus sales to continue hurtling down and end FY21 with a 40-50 per cent year-on-year decline.

V G Ramakrishnan, founding partner and managing director at consulting, Avanteum Advisors, said the bus market has been going through structural changes and is likely to remain depressed in the foreseeable future as states that accounted for close to 80 per cent of the total sales have gone slow on buying.

“The metro rail in cities like Delhi has emerged as a big threat to buses. Expect a similar trend in other cities once metros become more affordable,” said Ramakrishnan. Gone are the days when states will place large orders. Some segments such as long-distance intra-city travel are unlikely to revive and see demand for another three to four years, he said.

In FY20, the share of buses in the overall automobile sales was 0.72 per cent. Over the past decade, the segment has seen a negative compounded annual growth rate of 1.77 per cent.

Vinod Aggarwal, Managing Director and CEO at Volvo Eicher Commercial Vehicles, which sells buses under the Eicher brand for schools and under the Volvo brand for inter and intra-city transport, is not giving up. “It’s not that sales will continue to decline for ever. Once schools reopen, sales will start picking up,” he said.

For Eicher, schools account for almost a third of total sales. April to July is the period when schools buy buses but this year has been a total washout on account of the pandemic, said Aggarwal. Also, with most companies continuing the practice of work from home, buses deployed for staff transportation have been rendered useless. Demand from state transport undertakings and state transport corporations that run long-distance buses, too, have taken a big hit as people are preferring to drive down in their personal vehicles, said Aggarwal.

Satyakam Arya, chief executive and MD at Daimler India Commercial Vehicles, expects demand from corporations for buses to increase once offices resume normal operations. “Offices will continue to adhere to social distancing norms and will therefore need more buses to staff commute,” said Arya.

Both Arya and Aggarwal, however, conceded that bus makers will have to endure the slowdown pain for a longer period compared to the rest of the segments in commercial vehicles. Thanks to the demand from e-commerce firms and buoyancy in rural India, light and small truck sales are seeing an uptick in demand. However, the heavy-duty trucks (those in the range of 16 to 49 tonne) are still facing headwinds as demand for haulage and tractor trailers — the trucks deployed by capital goods and construction sectors — remain highly subdued.

According to ICRA analysis, although CV retail sales are reviving, it remains a far cry from pre-pandemic levels. Against a monthly sale of 80,000+ units reported prior to the pandemic, CV retail sales trended at less than 40,000 units in September 2020, even after four months of sequential improvement. Commercial vehicles sales have their fortunes closely tied to economic growth. Buses represent the next-level indicator and the outlook for them is a pointer to a longer economic slowdown.