industry

Post-IL&FS dry patch bulldozes commercial vehicle sales in November


NEW DELHI: The liquidity tightening that followed a crisis at Infrastructure Leasing & Financial Services hit sales of medium and heavy commercial vehicles sharply in November after recovering strongly over the past year from the twin impact of demonetisation and GST implementation.

According to industry estimates, sales of medium and heavy commercial vehicles dropped more than 20% last month, the sharpest decline since May 2017, when volumes fell by 33% to 16,716 units vehicles. Share prices of many commercial vehicle makers are now close to their 52-week lows.

“There is a lot of control over banks and mutual funds lending to NBFCs after the IL&FS crisis. This has reduced loan availability to truck operators, limiting their ability to purchase vehicles,” said Vinod Aggarwal, managing director, VE Commercial Vehicles, a venture between Volvo and Eicher Motors.

VE Commercial sold 3,935 units last month, a 7% decline from a year earlier. Sales at market leader Tata Motors dropped 24% to 9,793 units last month, while Ashok Leyland’s sales dipped 18% to 8,718.

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“November was challenging due to low consumer sentiments as a result of liquidity tightening in the market, higher interest rates and rising fuel costs,” said Girish Wagh, president (commercial vehicle business) at Tata Motors.

Additionally, a change in norms that allows commercial vehicles to carry more has affected sales.

“Sale of 100 trucks adds as much carrying capacity as earlier sale of 115-120 trucks. However, increase in freight demand is dependent on GDP growth, which has largely remained unchanged,” said Rajan Wadhera, president (automotive), Mahindra & Mahindra. “With freight capacity increasing at a faster pace than freight demand, there is downward pressure on freight rates and slowdown in truck sales.”

Mahindra’s medium and heavy commercial vehicle sales slid 20% to 637 units in November.

Industry executives said they expect demand to remain weak in the near term and improve somewhat in the last quarter. “We expect to see a rebound in the coming months as liquidity has started to ease and fuel prices have moderated due to reduction in global crude prices,” said Wagh.

“A lot of investments are being made in infrastructure projects, expected to fuel demand for construction trucks,” said Aggarwal.

“Q4 F19 may witness some revival due to the usual year-end increase in buying and thrust to government-led infrastructure projects and other spending,” concurred Wadhera. Mahindra expects demand to improve in FY20, ahead of stricter emission norms that come into effect in April 2020.





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