The Indian commercial
vehicle industry sales has slowed down over the latter second half of FY2019,
reeling under multiple headwinds, which have continued into the current fiscal
as well. Nevertheless, the robust growth during the first few months of the
fiscal supported the overall growth during the year, with the domestic industry
volumes expanding 18 per cent during the year.
The slowdown in growth
during second half of FY2019 was led by the M&HCV (Truck) segment, which
contracted during the period. Sruthi
Thomas, Senior Analyst, ICRA Ratings, informed “The road transportation sector is currently
facing over-capacity, partially contributed by revision in load carrying norms
in July 2018, which resulted in a 15-20 per cent increase in capacity of CV
parc, and partially by GST implementation and the resultant improvement in
turnaround time. Furthermore, the strong growth in CV sales over the past two
years outpaced the underlying freight generation, leading to surplus capacity.”
In addition to the
impact of revised axle load norms, the impact of slowing economy and tight
liquidity in the NBFC space is also contributing to weak sales.
“With the slowing economic growth and flat freight rates, the earnings
of fleet operators have come under pressure in recent months. This coupled with
the ongoing liquidity crisis in the NBFC sector, have turned financiers
cautious on lending to the goods carrier segment, thereby impacting their
financing avenues,” added Thomas.
On sectoral lines, the
slowdown in automobile sales in general has led to sharp reduction in demand
for car carriers (tractor trailers), while extended receivable cycle of
construction contracts (during moral code of conduct) has also put brakes on
tipper sales over the past few months.
performance of other segments like LCVs and buses was not as bleak as the
M&HCV (Truck) segment, these have also slowed down in recent months.
Overall, the industry volumes contracted by 8 per cent in YTD FY2020.
With expectation of
almost 10-12 per cent increase in vehicle cost for BS VI-compliant vehicles, it
is expected to be pre-buying by large fleet operators ahead of BS-VI
implementation in April 2020.
ICRA maintains it
stable outlook for the domestic CV industry, expecting it to grow in the range
of 7-9 per cent during FY2020.