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Sluggish transport sector behind medium & heavy commercial vehicles' record sales dip

Slowdown in mining, manufacturing and uncertainty on monsoon have weighed on commercial vehicle sales

Sharmistha Mukherjee New Delhi
Last Updated : Apr 13 2013 | 12:58 AM IST
Despite record discounts, sales of medium and heavy commercial vehicles (MHCVs) slumped 23 per cent in the year ended March, the steepest drop since the height of the global economic slowdown in 2008-09. With various restrictions on mining, uncertainty on the monsoon and manufacturing activity not showing signs of a turnround, it is expected MHCV sales would rise just one to three per cent this financial year.

Between January and March this year, MHCV sales, considered a key indicator of economic health, fell 33 per cent to 70,184 units, compared with 1,04,295 units in the corresponding period last year.

S P Singh, senior fellow and coordinator, Indian Foundation of Transport Research & Training (IFTRT), said, “Last financial year, at 1,009.73 mt, Indian Railways recorded a moderate increase of four per cent in freight traffic, owing to the high import of coal (450 mt). But due to a slowdown in manufacturing activity, long-haul freight carriage has been affected. Fleet utilisation by truck operators on trunk routes has dropped 15-25 per cent. Truck rentals have fallen seven to eight per cent. This is affecting replacement demand, which accounts for the bulk of MHCV sales.”

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While official numbers are yet to be reported, estimates by IFTRT suggest road operators’ tonnage in 2012-13 is unlikely to exceed the freight traffic of 4,014 mt recorded in 2011-12. “The manufacturing sector contributes more than 70 per cent to long-haul freight traffic. With moderation in agricultural growth, a drop in mining, a sustained slowdown in industrial activity and lower replacement volume, demand continues to be weak for medium and heavy commercial vehicles,” said S Sandilya, president of the Society of Indian Automobile Manufacturers.

Industry estimates indicate replacement demand accounts for about 80 per cent of long-haul commercial vehicle sales in the domestic market.

A senior executive at a leading commercial vehicle manufacturer said, “The worrying thing is despite record discounts of Rs 50,000-2,50,000, sales in the MHCV segment are not picking up. Now, fleet operators are adopting a cautious approach; they are not replacing vehicles, after their experience during the slowdown in 2008-09, when many had fallen into a debt trap after making purchases.” With truck owners deferring purchases by 8-10 months, inventory levels for heavy trucks have more than doubled.

A revival in medium and heavy truck sales seems unlikely in the near future. Data on the Index of Industrial Production released on Friday show the manufacturing sector (which has a weightage of 75 per cent in the index) grew a mere one per cent in the April-February period, against 3.7 per cent in the year-ago period. Mining output contracted 2.5 per cent during the same period.

“Given the current macro economic conditions, it seems unlikely the sector would revive in the next six months,” said Vinod Aggarwal, chief executive officer, VE Commercial Vehicles.

While MHCV sales fell 23.18 per cent to 2,68,263 units in 2012-13, the light commercial vehicle segment expanded 14.04 per cent to 5,24,887 units, owing to demand for vehicles for last-mile transportation. Total commercial vehicle sales (MHCVs and LCVs combined) declined two per cent to 793,150 units last year.

Siam has requested the government to take steps to boost CV sales. Sandilya said, “Once the mining sector opens up, there would be an immediate revival in demand for MHCVs. We have recommended the government speed up spending in infrastructure projects, especially for road construction, and enable the purchase of commercial vehicles for municipal applications to boost demand.”

MHCV Sales 2011-12 2012-13 %Change
Q1 75,054 66,048 -12
Q2 85,726 74,645 -12.9
Q3 84,141 57,832 -31.8
Q4 104,295 70,184 -32.7

Source: Society of Indian Automobile Manufacturers

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First Published: Apr 13 2013 | 12:43 AM IST

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