CV wholesales in December outperformed in both, M&HCV and LCV segments

Demand for M&HCV segment is coming close to the pre-Covid level of 2019 but is still far below the 2018 level

Wholesales of commercial vehicles (CVs) in December recovered strongly on the back of a pick-up in infrastructure, mining activities, irrigation projects, e-commerce, auto and other sectors. M&HCV volumes were flat YoY, while they grew 38 per cent month-on-month. LCV volumes grew by about 14 per cent YoY and 14.5 per cent month-on-month. The overall drop was largely due to pressure on bus sales, which continues.

M&HCV demand is closing in on the pre-Covid level of 2019 but is still far below the 2018 level. However, industry players said it is not wise to compare the numbers with 2018, since in 2020 axle-load norms were revised, leading toan rise in tonnage. Companies have said, cargoes that used to be carried by three trucks are now carried by two.

Small commercial vehicles (SCV) and LCVs were the first to rebound with unlocking. Lately, as economic activity has opened, demand for ICVs, M&HCV tippers has recovered, while demand for long-haul is improving.

Girish Wagh, President, Commercial Vehicles Business Unit at Tata Motors, said M&HCVs and I&LCVs have led the recovery, growing by 10 per cent and 7 per cent respectively over Q3FY20, with higher demand in infrastructure including road construction, mining and e-commerce. The offtake continued to be higher than retail to support sequential month-on-month growth in retail while ensuring healthy inventory levels in the pipeline. 

A company spokesperson said the CV industry is cyclical in nature, and every subsequent crest and trough has been higher than the previous one, thereby maintaining a steady and a secular growth trend in the long run. The industry saw its previous peak in 2018-19 and since then has been on a decline. 

 

"This time, we've seen a prolonged decline in MHCV volumes and the extent has also been much more pronounced than previous down cycles," he said, adding that encouraging part of the M&HCV revival is the recovery in M&HCV cargo, which for the first time this year, saw volumes growth over last year by as much as 16 per cent.

Anuj Kathuria, COO, Ashok Leyland said month after month demand is better and December was no different, driven largely by ICVs, which make up 30 per cent of the Total Industry Volume (TIVs), and by tippers. This is due not to pent-up demand but to improvement in road construction activity, irrigation projects, movement of automobiles, steel, cement and containers. 

The long haul segment is better, but to what extent it will continue to need to wait and watch, said Kathuria, adding that it is not fair the numbers do not compare with 2018, which did not have revised axle load norms. Cargoes carried by three trucks are now being carried by two trucks.

He added that demand in ICV and tippers are returning to 2018 levels. Overall he expects that 2021-22 will be better, but on a lower base in FY21.

Increase in input material cost will be a pressure, which he is confident that customers will observe considering the better total cost of ownership in BS-VI products and demand for trucks are increasing.

Satyakam Arya, MD & CEO, Daimler India Commercial Vehicles (DICV) added Government's investments in infrastructure projects and pick up in mining activities should lead to a sharp rebound in 2021. There is also improvement of demand in the medium duty truck segment related to agriculture goods movement. The overall demand in MHCV segment is coming close to the pre-COVID level of 2019 but is still far below the 2018 level.

 

The lightweight commercial trucks’ industry is also doing well because of the agricultural segment and increased demand for last-mile delivery goods due to lockdown and present situation post Covid-19.

On the outlook, he said, MHCVs are expected to grow in strong double digits in 2021 with construction and mining activities gaining momentum gradually, mainly driven by recovery of the economy.

The magnitude of sales in the upcoming months will significantly depend on the continued pace of economic recovery coupled with the Governments’ initiatives. The second half of the financial year will be crucial for the commercial vehicle industry, said Tata's spokesperson.

As the economy recovers and the GDP comes back to its earlier levels, the CV industry will grow proportionately. 

While the GDP declined to about 23–24% in the Q1 of this year, analysts have predicted that there will be a steady rise in the subsequent quarters of the fiscal and this is going to benefit the CV sector. In the short term, increase in e-commerce activities, increase in demand for raw materials as well as announcements of infrastructure activities will collectively boost the entire commercial vehicle industry. Scrappage policy is another factor that will play a major role in boosting the replacement demand in the immediate future.