Truck sales to decline in 2017-18: India Ratings

Truck sales are expected to decline in 2017-18 on a slowdown in replacement demand, weak industrial activity, rising diesel prices and overcapacity, according to India Ratings.

The decline in medium and heavy commercial vehicle (MHCV) sales in April-December 2016 is 2 per cent, year on year. Sales in January rose 1 per cent in anticipation of the implementation of the BS-IV emission standard, which will increase vehicle costs by 9-10 per cent.

India Ratings said replacement demand, a key driver for truck sales in 2015-16 and 2014-15, had been depleted. Given continued industrial uncertainty, the agency said haulage rates were likely to remain flat and rising diesel prices would squeeze margins of transporters.

The sub-25 tonne truck segment was the volume driver in 2015-16 but has declined sharply in 2016-17, suggesting overcapacity.

India Ratings said demonetisation had affected second-hand sales, impeding transporters’ efforts to sell old trucks to raise funds for new ones. The implementation of the goods and services tax in 2017-18 is expected to cut carriage time significantly and could create more spare capacity among transporters, again dragging down truck sales.

Commercial vehicle makers Ashok Leyland and Mahindra did not respond to emails seeking comments.