Commercial vehicle sales fall in FY 2012-13

The commercial vehicle (CV) segment took a beating in the financial year gone by with the segment as a whole registering a decline of 2.02 per cent during April-March 2013 over the same period in the previous fiscal year. However, as with the passenger vehicle segment, one particular segment rescued the overall segment from a rather sharp decline in sales during FY 2012-13. 

The Light Commercial Vehicle (LCV) segment registered a growth in sales and that too a commendable 14.04 per cent in FY 2012-13 on a Y-O-Y basis, keeping current market conditions in mind. The Medium and Heavy Commercial Vehicle (M&HCV), on the other hand, registered a drop in sales of 23.18 per cent  during April-March 2013 over the same period in the previous fiscal year. 

The sharp decline of the M&HCV segment is accounted for by sustained slowdown in the industrial sector, drop in mining activity, moderate agriculture growth and lower replacement volume of vehicles. 

The government has taken positive measures to provide an impetus to the commercial vehicle sector to boost sales in the current financial year by dropping excise duty on CV chassis by 1 per cent, dropping loan interest rates of government banks from 14.5 per cent to 14.3 per cent and extension of the JNNURM scheme for purchase of buses for hilly states. 

Private sector banks and NBFCs have also dropped loan interest rates for commercial vehicles from 18 per cent to 17.5 per cent and from 19 per cent to 18.5 per cent respectively to boost demand for loans and commercial vehicles. 

Looking forward

M&HCV sales declined further by 26.16 per cent in March 2013 and sales are expected to remain sluggish over the next few quarters with marginal recovery in the second half of FY 2013-14 subject to projected economic growth. 

The projected GDP industry growth of 5.1 per cent and projected agricultural GDP growth of 3.5 per cent should improve demand for the M&HCV segment with increase in freight. Normal monsoons and lower interest rates to support agricultural growth and resulting in higher incomes combined with pre election welfare spending by the government could boost sales. 

However, the continued ban on mining coupled with the slowdown in the construction of national highways to adversely impact demand for tipper trucks. Also, the hike in diesel prices in the future by Rs 5 by the end of FY 2013-14 along with the government’s partial deregulation policy to contribute to the sluggish demand for the M&HCV segment. 

Small Commercial Vehicles (SCV) are going to continue to drive the growth of LCV sales in FY 2013-14 due to growth in organised retail and their requirement for freight transfer in last mile connectivity. Better cost economics, higher loading capacity and ease of use have made SCVs more popular over three wheeler goods carriers. 

The LCV bus segment that accounts for 50 per cent of bus sales is expected to experience a growth in sales backed by demand from educational institutions. Demand for M&HCV to be driven by orders under JNNURM and replacement of old buses. 32-48 seater buses are also replacing bigger MCV buses with 54-59 seats to a limited extent due to cost efficiency and versatility of applications. 

SIAM has also suggested a few measures to the government to boost demand for commercial vehicles in the country by adopting fleet modernisation schemes, purchase CVs for municipal applications, increase depreciation rate of CVs to 60 per cent and enforce stricter legal provisions against overloading. 

SIAM also proposed that the industrial measures to the government to give an impetus to the commercial vehicle segment by opening up the mining sector at the earliest and speed up infrastructure spending, especially that of road construction. 

Sales projection for commercial vehicle sales in FY 2013-14

SIAM stated that the commercial vehicle sector holds a probability of registering a growth of 7-9 per cent in the April-March 2013-14 financial year with LCV goods, M&HCV goods and passengers buses sales expected to grow at 10-12 per cent, 1-3 per cent and 6-8 per cent respectively. 

With raw material prices expected to remain stable and loan interest rates going to dip further the base for sales to grow seem to be on the right track, however, the hike in diesel prices by a total of Rs 5 by the end of FY 2013-14 has the potential to dampen spirits slightly in the commercial vehicle segment depending on industrial growth of the nation. 

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