Truck, bus sales touch record high in FY18, same trend expected in FY19

Cumulative commercial vehicle sales of the top four manufacturers rose 20.6 per cent to 856,000 units during 2017-18

Truck and bus sales in India rose at a brisk pace in the financial year that ended March 31, with most companies in the sector reporting record sales volumes. A pick-up in infrastructure projects, overload bans in some key states and easy financing fuelled the demand.

Cumulative commercial vehicle (CV) sales of the top four manufacturers rose 20.6 per cent to 856,000 units during 2017-18 over a year before, according to monthly sales data released by the companies on Monday, barring Bharat Benz, the truck brand of Daimler India Commercial Vehicles -- it does not share monthly or yearly sales data.

Order flow at listed capital goods and construction companies, one of the primary users of CVs, rose sharply in FY18, according to the data compiled by the Business Standard Research Bureau. Orders from here rose 69 per cent during the year to about Rs 2.8 trillion.

Most manufacturers saw record sales. The strong performance of medium and heavy-duty trucks, biggest contribution to a company's profit, stood out. These M&HCV sales are often taken as a proxy for economic activity and were robust in most of FY18.

Despatches at Tata Motors, the market leader, were the highest in five years. Automobile companies in India count despatches to dealers as sales. Tata Motors sold 399,000 units, up 23 per cent over the past year. Ashok Leyland, second largest, saw sales rise 21 per cent to 174,873 units. It was an equally good year for Volvo Eicher Commercial Vehicles, where March sales rose to a record 9,411 units, up 28.4 per cent. For the full year, it sold 65,921 units, up the same proportion over a year before.

Mahindra and Mahindra, a late entrant in the medium and heavy duty truck segment, reported sales of 9,484 units, up 41 per cent, the highest since it entered the market a decade before.

Girish Wagh, president of the CV business unit at Tata Motors, said the government's push towards infrastructure development, restriction on overloading of trucks, push on road construction and mining had boosted demand in the M&HCV segment, resulting in growth of 21 per cent. Within that, the tipper segment drove demand, rising 58 per cent due to increased requirements for movement of aggregates, sand and coal.

Other segments, he added, including light CVs, also reported robust growth, driven by new product launches and the e-commerce and logistics sectors.

Awarding of highway construction projects rose 70 per cent to an all-time annual high in 2017-18, spanning 7,400 km and valued at Rs 1.2 trillion, said CRISIL Reseach, citing data from the National Highways Authority of India (NHAI). That compares with 4,300 km of projects worth Rs 59,000 crore awarded in 2016-17.

CRISIL Research expects both award and execution of projects to be even faster in FY19 and FY20, if NHAI manages to source funds on time and over the budgetary allocation.

Analysts expect CV sales to be robust in the months ahead. The CV cycle could be extended, benefiting from a pick-up in infrastructure activities and boosted by legislative measures. "A dilution of the scrappage ban essentially ensures the CV cycle will be dependent only on on-ground demand drivers," wrote Jamshed Dadabhoy and Arvind Sharma, analysts at Citi Research, in a March 29 report.

They expect a pullback in M&HCV sales beyond FY20, with BS-VI emisison norms to be implemented in FY21, and legislation- related cost pressure to raise vehicle prices by five to seven per cent.