Truck makers face GST overload

The goods and services tax (GST) has caused a slowdown in demand for commercial vehicles as transporters grapple with a fall in haulage rates.

Medium and heavy commercial vehicles have been the worst performing segment of the automobile industry in the April-June quarter, with a 32 per cent contraction in sales to dealers.

The two top players, Tata Motors and Ashok Leyland, reported double-digit decline in sales.

“There has been a decline in haulage rates since the imposition of the GST. Almost 20 per cent of the logistics industry’s fleet is unutilised. Unorganised players are not yet on board with the new tax structure and it will take a few months before they become familiar with the GST regime,” said Rajan Wadhera, president, automotive sector, Mahindra & Mahindra.

“Since these unorganised players source from the organised sector, the entire chain is disturbed. We are in a wait and watch situation,” said Bal Malkit Singh of Mumbai-headquartered Bal Roadlines, which has a fleet of 350 trucks.

Daily freight on major routes has declined by 10-15 per cent though contracts between transporters and companies have not been affected.

Sales of medium and heavy commercial vehicles in the country declined 1 per cent in 2016-17 to 255,267, mainly affected by last November’s demonetisation.

A Supreme Court ruling in March barring registration of vehicles compliant with BS-III emission norms from April also affected sales. “Since there was an advancement of purchases in March, sales in the April-June quarter were weak,” said Vinod Aggarwal, managing director and chief executive officer, Volvo Eicher Commercial Vehicles.

“The industry has seen a series of disruptions in the last three quarters,” said Aggarwal. “July is also expected to see a decline in sales,” he added. “The industry is expected to come back to normal by mid- September, with the advent of the festive season,” said Wadhera. He said Mahindra & Mahindra’s July sales were affected less than overall industry sales.