All is not well with the commercial vehicles market, which along with steel and cement is considered a barometer of industrial activity in the country. A Delhi-based think-tank has said that October truck sales are down sharply, while rentals have softened ten per cent and manufacturers are contemplating production cuts.
According to a study carried out by the Delhi-based Indian Foundation of Transport Research and Training, truck sales in October have fallen as much as 30-40 per cent as compared to October 2007. The study also says manufacturers are saddled with more than a month’s inventory of over 19,000 trucks.
Sales have been hit by the sharp rise in the cost of finance — over 90 per cent truck purchases are financed by non-banking finance companies. According to industry sources, NBFCs have increased the margin money as well as interest rates considerably. This has led to higher default rates and also cases of repossession of vehicles.
The IFTRT study says that around 6,000 trucks have been re-possessed and these are now being sold in the market to recover arrears. This has further impacted sale of new trucks.
The general industrial slowdown has made matters worse. Latest government data shows that growth in the index of industrial production fell to 4.9 per cent in April-August this year from 8.3 per cent in April-August last year.
Truck manufacturers will come out with October sale numbers early next month. Numbers collated by the Society of Indian Automobile Manufacturers show that between April and September this year, commercial vehicle sales grew 3.79 per cent over the same period of the previous year.
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A careful analysis of these numbers shows that this growth was led by light commercial vehicles. Medium and heavy commercial vehicles, which are used to lug goods over long distances, saw sales dip 1.57 per cent during the six-month period.
Truck manufacturers like Ashok Leyland, Eicher Motors and Asia Motor Works have hinted at production cuts to adjust their stocks to the demand in the market place. The largest player in the business, Tata Motors, has however said that it will go ahead with its planned expansion of capacity.
Ashok Leyland CFO Sridharan said that the company will look at cutting production substantially in the near future to clear stocks. Asia Motor Works Vice-president (marketing) RC Mangal added: “We have not cut production till now but will look at it if the situation does not improve". The company sells mostly in the heavy segment.
Leading transporters told Business Standard that their demand for trucks was no longer robust. Transport Corporation of India Executive Director Vineet Aggarwal said: “Currently, growth is slow and there are clear signs of a slowdown in the demand for trucks.”