Commercial vehicle demand set to accelerate
Premium- Commercial vehicle sales in Q1FY23 were marginally below the peak volume seen in Q1FY19
NEW DELHI : Commercial vehicle sales are poised to improve from August as fleet operators are likely to complete purchases during the festive season, industry executives said.
Fleet operators were delaying replacing or adding to their existing fleet due to high fuel and commodity prices, but now the effect of stabilizing commodity prices, especially steel, is expected to arrest the rise in commercial vehicle prices in the second quarter of this fiscal year, boosting demand for vehicles, they added.
Commercial vehicle sales at 225,000 units for the June quarter (Q1FY23) were marginally below the peak volume of 230,000 units seen in the June quarter of FY19, but the recovery in the medium and heavy commercial vehicle segment (M&HCVs) was slower at 76,000 units, compared to 89,000 units in the corresponding quarter in FY19, according to industry body, Society of Indian Automobile Manufacturers (SIAM).
“Commercial vehicle registrations have been in the area of negative 4-5% growth from 2019 levels for the last few months. We expect August to remain at similar levels. We see strong customer inquiries and interest, but the conversion rate is low, and we expect it to improve in a month or two as fleet operators make up their minds. We expect growth coming in from the festive months of September-October. But fleet operators are in a positive mindset and are coming in for inquiries," said Vinkesh Gulati, president of the Federation of Automobile Dealers Associations (FADA).
“Growth estimates for M&HCVs are in excess of 15% for this financial year. On the ground, too, we see a lot of traction across all ranges of our products. We feel optimistic that demand for this segment should continue for the next few quarters. There are certain hurdles ahead of us in the form of inflationary pressures and interest costs. But India seems to be moving along pretty well on the expected 6.5-7% GDP growth. With those types of growth rates, we should see a strong, continued recurrence of Q1 demand for M&HCVs", said Dheeraj Hinduja, executive chairman, Ashok Leyland. “We will see the benefits of a commodity price decline to come in through the second quarter."
Steel prices, according to Ashok Leyland chief financial officer Gopal Mahadevan, were still higher in Q1FY23 than in Q4FY22. The CV maker, like its peers, took a series of price hikes to pass on higher raw material costs to customers.
“We are also seeing a sharp recovery in the bus segment as the covid-19 scenario recedes. We expect most schools, colleges, institutions, offices, intercity and long-distance transportation to open up, which will further contribute to volume growth," Mahadevan added.
The bus segment for rival Tata Motors also staged a strong recovery, clocking 60% growth over March quarter volumes due to the reopening of schools and replacement of buses. “Commercial Vehicle sales are poised to grow on the back of increasing infrastructure activity, demand for-last mile mobility and a strong recovery in the bus segment due to rising demand for public transportation. The supply situation continues to show improvement. We are cautiously optimistic on demand but keeping a close watch on interest rates and transporter profitability," Tata Motors said.
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