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Truck sales fall for 11th straight month

by ET Posted on 05 Feb 20132,402 Views Comments

Truck sales in India fall for 11th straight month on stagnant freight rates and costly loans


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Truck sales in India fell for the eleventh straight month in January as stagnant freight rates and costly funds forced fleet operators to hold back on new purchases despite attractive discounts. Sale of medium and heavy trucks, often considered a barometer of the country's macro economic health, fell 38% in January from the year-ago month, even as discounts and incentives for buyers peaked. 


Manufacturers say the downtrend is due to stagnation in freight rates over the past few months, as also slump in demand for new vehicles from companies involved in mining, infrastructure and real estate, the key sectors that drive growth in India's truck market. Tata Motors, the country's largest commercial vehicle manufacturer, said sales of its medium and heavy trucks hit a four-year low in January to 8,722 units, down 52% from the 18,339 units it had sold in the same month last year Similarly, Ashok Leyland, the No 2 bus and truck maker, posted a 25% drop in sales to 6,863 units, compared with 9,200 units sold in the year-ago month. 


"Truck sales are largely portraying the state of our economy. We have seen demand dipping across all major sectors, especially mining, and the bigger multi-axle vehicles are the worst hit," said Vinod Aggarwal, chief executive of VE Commercial Vehicles Ltd, a joint venture between Volvo and local partner Eicher MotorsBSE 0.36 %. "Fresh investments are being pulled back by transporters, which has led to the dwindling performance of all categories of bigger trucks." Some analysts attribute the continuing fall to the demand-supply mismatch across the country. 


"There is oversupply and the stagnant freight market has forced a further slump," Abdul Majeed, partner and executive director at PricewaterhouseCoopers India, said. "We expect muted sales to continue for the next new months and some revival in demand only in the second half." Majeed said the country faces an oversupply of trucks with about six million on the roads at present. Costly loans were another reason transporters were delaying replacement of fleets, he added. 


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