CV makers expect recovery from second half of FY21
Even as domestic sales of commercial vehicles (CV) are headed towards a decadal low in FY21, industry leaders are expecting better days in the second half of the financial year.
While economic slowdown, drying up of infrastructure projects and revised axle norms hit the sector badly in FY20, the coronavirus pandemic has worsened the situation.
CV sales had declined 29 per cent in FY20 and Hetal Gandhi, director, CRISIL Research, expects them to fall this year too. “CV sales are expected to fall 26-28 per cent in fiscal year 2021,” said Gandhi.
In FY20, CV sales were impacted by the increase in freight capacity due to the revised axle norms and limited support from freight demand.
Additionally, transporters shied away from new purchases because of the higher down payment demanded, especially by non-bank finance companies (NBFCS). Also, there was lower resale value of trucks in the second hand market, owing to the NBFC liquidity crunch, said Gandhi.
This year, fleet utilisation will take a further hit with declining freight demand due to the slowdown in economic growth and private consumption.
Industry experts said things should improve from the second half of the current financial year and the industry would return to growth in FY22.
Vinod Aggarwal, managing director (MD) & chief executive officer (CEO), Volvo Eicher Commercial Vehicles, expects demand to pick up from September or October. He said, “Only 30-40 per cent of the fleet capacity is being utilised in the country today.”
Ashok Leyland MD and CEO Vipin Sondhi said the government’s ~20 trillion package has the potential to be “sustainably beneficial” to all sectors and help revive the commercial vehicle industry.
Analysts at CLSA expect a recovery in both passenger and commercial vehicles in FY22.
According to the foreign brokerage, the country’s largest truck maker, Tata Motors, will see a 13 per cent fall in medium and heavy commercial vehicles (M&HCVS) sales volumes and a 15 per cent decline in the case of light commercial vehicles (LCVS) in FY21.
This will be followed by a 22 per cent sales growth in M&HCV and a 10 per cent LCV growth in FY22.
Tata Motors declined to comment on queries from Business Standard.
Sondhi added, “You will find longhaul heavy-duty trucks definitely come into play as the economy opens up. It may take a little longer, but it will have a huge impact on all the CV companies. A farmer is allowed to sell his produce to any part of the country now. One can imagine how much harvest is going to be seen across the country. This will lead to creation of new demand in addition to existing ones. It is an opportunity and whoever moves to take it – we are determined to do that – will benefit.”
Rajaram Krishnamurthy, vicepresident, marketing and sales and customer services, Daimler India Commercial Vehicles, said, “A bounty harvest will generate better payload from the rural areas.”