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The election code, restricting the circulation of cash, has impacted commercial vehicle (CV) sales in the post-festival period, according to industry insiders. The limit on cash handling during elections is Rs 2 lakh.
Data from the Federation of Automobile Dealers Association (Fada) showed that CV sales were down by almost 2 per cent in November (the Diwali month) to 84,586 units, compared to 86,150 units during the same month in 2022. Compared to October, sales were down by 4.64 per cent.
Fada numbers represent retail sales, or actual sales from the dealer to the customer.
Among companies, sales of industry major Tata Motors (which enjoys a 35 per cent market share in CVs, according to Fada as of November) were down by 8 per cent to 29,700 units during the month, as against 32,240 units.
Similarly, Ashok Leyland was also down by 9 per cent, from 14,186 units last November, to 12,946 units this November.
When asked about this, a company executive of a leading CV player said that the figures for only one month were down due to some stock correction happening at the retail end.
“What is happening with CVs is a temporary thing. Because of a lot of restrictions on cash handling in election-bound states, there was a reduction in sales. Unseasonal rain, delayed delivery, and liquidity issues were also concerns for the sector. We are optimistic about the future, as we are expecting good orders in cement and coal,” said Manish Raj Singhania,
president, Fada.
Fada noted in a recent report that “states going into elections also added to the woes, overshadowing the brief uplift from festival sales and the slight increase in tourism that helped in the sales of buses”.
Kinjal Shah, vice-president and co-group head-corporate ratings, ICRA, said that the medium and heavy commercial vehicle, or M&HCV (goods), segment reported a year-on-year (Y-o-Y) growth of 7 per cent in wholesale volumes in the first half of 2023–24 (FY24) and is expected to close FY24 with volume growth of 3-5 per cent.
The same will be driven by freight movement during the festival period and healthy construction activity expected prior to the implementation of the model code of conduct, after which volumes may witness some slowdown.
The same will be driven by freight movement during the festival period and healthy construction activity expected prior to the implementation of the model code of conduct, after which volumes may witness some slowdown.
Overall, the high base of the second half (H2) of 2022–23 will impact growth in H2FY24. She added that overall, for the domestic CV segment, she expects 2-4 per cent growth in FY24, supported by 12–15 per cent growth in the bus segment.
The light commercial vehicle (LCV) segment is expected to report a marginal growth of 0–2 per cent in FY24 with the base effect catching up, some slowdown in e-commerce demand, along with some cannibalisation from electric three-wheelers.
Another company executive said that when one looks at the trend over three to four months, the data is completely different.
In August, September, and October, CV sales were up by 3 per cent, 5 per cent, and 10.3 per cent, respectively.
At a wholesales level too, CVs posted a mixed performance; overall CV wholesales grew by a low single digit in November.
According to a JM Financial report in December, total CV volumes for Ashok Leyland declined by 5 per cent, and Tata Motors declined by 3 per cent on a Y-o-Y basis. In the case of Ashok Leyland, M&HCV volumes declined by 11 per cent Y-o-Y, while LCV volumes increased by 7 per cent.
Volvo Eicher Commercial Vehicles posted a Y-o-Y growth of 3 per cent in M&HCVs. Bus volumes, however, have been steady: Tata Motors bus volumes grew by 4 per cent, while Ashok Leyland’s grew by 3 per cent.
“Overall, sales momentum is expected to be driven by improving fleet operators’ fleet utilisation and rising bus orders from state transportation undertakings. The CV industry is expected to grow by mid-to-high single digits during FY24,” JM Financial noted.
Wholesales are sales from original equipment manufacturers to dealers.
Industry sources indicated that the dip in wholesales is partially due to stocking up before the festival months of September and October.
In a November analyst call, Girish Wagh, executive director, Tata Motors, said that the M&HCV segment will see continued growth in the third quarter (almost double-digit). But he felt that the fourth quarter (Q4) would be flat or have little growth because last year’s Q4 was “pretty good”.
“I think talking about 2024–25 is too early. We have a key monitorable, which is the general elections happening in the first quarter (Q1) of next year. To talk about Q1 or second-quarter demand for next year’s M&HCV, we’ll have to wait at least one quarter to see how the order book of fleet owners and infrastructure builders is panning out, and we will come to know something about that when we meet next quarter,” Wagh said.
Fada noted that while the CV category saw a challenging November, driven by poor market sentiment, seasonal slumps, unseasonal rains damaging crops and impacting transport demand, liquidity issues, and delayed deliveries, it is expected to see some recovery driven by renewed business activities after elections and positive movements in key sectors like cement and coal. Backlogs in orders might also contribute to a sales boost.
