Riding on the combined impact of a pick-up in the infrastructure sector, last year’s low base and an overloading ban, commercial vehicle sales at most companies expanded in the high double digits in April.
Sales volumes of the top four manufacturers rose 78 per cent over the year-ago period to 67,548 vehicles, shows monthly sales data released by companies. Analysts expect the momentum to remain robust for the whole of the June quarter as the base effect of last year plays out.
Following a Supreme Court order that restricted manufacturers from selling BS-III vehicles from April 1, 2017, commercial vehicles sales had hit a speed bump, posting a steep decline of 22.93 per cent in April to 41,490 vehicles. The order caught most firms off guard and caused a major disruption in their supply chain. Subsequently, the switch to the goods and services tax (GST) in June also dented sales, resulting in a painful first quarter for most companies.
Often considered a barometer of a country’s economic activity, truck and bus volumes have been rising steadily. Sales ended 2017-18 with 20 per cent growth at a record 856,000 vehicles, according to the Society of Indian Automobile Manufacturers.
The sales rally in April was led by market leader Tata Motors, which saw its volumes more than double over the last year, led by strong sales of small, light, and medium and heavy commercial vehicles. During the month, the Tata group flagship sold 36,276 vehicles against 16,017 a year earlier.
Girish Wagh, president, commercial vehicles business unit, Tata Motors, attributed this to positive economic factors, including infrastructure growth, improved industrial activity and consumption-led demand. In 2017-18, the National Highway Authority of India (NHAI) awarded 150 road projects of 7,400 km. The length of projects awarded during the year was an all-time high. The current financial year is also expected to be a busy one.
The Index of Industrial Production (IIP) advanced 7.1 per cent in February, driven by strong manufacturing growth, registering the fourth straight month of growth above 7 per cent. The capital goods segment, which connotes investment, grew at a robust 20 per cent in February, up from 12.8 per cent in the previous month.
Dispatches of medium and heavy duty trucks at Tata Motors saw a three-fold increase, year on year, to 14,028 during April. A restriction on overloading, road construction, building of irrigation facilities and housing projects in addition to the company’s superior product and SCR technology resulted in growth of 317 per cent in the medium and heavy commercial vehicles segment,” said Wagh.
Commercial vehicles sales at other companies also rose at a brisk pace. Ashok Leyland, the second largest player in medium and heavy commercial vehicles, reported a sales increase of 79 per cent. Volvo Eicher Commercial Vehicles and Mahindra Trucks and Buses too saw sales jump 28 and 26 per cent, respectively, the companies said in their monthly sales release.
“These are good times for the industry,” said Binaifer Jehani, director, research, Crisil. The momentum is bound to continue in the first quarter of the current financial year as the base itself was low last year because of the transition to BS-IV from BS-III. Medium and heavy commercial vehicle sales had fallen by 60 per cent,” said Jehani. Crisil expects commercial vehicles sales to expand by 10-12 per cent in 2018-19.
Speaking at the launch of the company’s initial public offering, R Sridhar, vice-chairman and chief executive officer, IndoStar Capital Finance, said he expected demand for commercial vehicles to sustain for three years. In sharp contrast to last year, “buyers at present have to wait for three to four months to take delivery of vehicles,” he said.
Abhijit Madhav Lele contributed to the story