The new emission norms being implemented from April 2020 will push up the truck prices considerably; this may further worsen the truck sales which is reeling under severe downturn, and massively falling fleet utilisation plunged the heavy trucks sales over 40%YoY.
The commercial vehicle sales between April-December 2019 has dropped by a substantial 23% YoY. There isn’t any clear indication of revival in the CV sector, and the decline in the economy, overcapacity of trucks likely to adversely impact the overall demand for trucks next year too.
Moreover, the BSVI emission norms kick-starting next year will make truck pricier which expected to further dent the already falling demand for the trucks. According to estimates, truck prices will go up by anywhere between 8-10% more due to BSVI norms, depending upon the vehicle segment. To meet the stringent emission norms, the BSVI trucks will get additional components and a much more technically complex after-treatment system, adding the extra cost to vehicles. However, there isn’t any clear indication of the quantum of the price hike. Truck manufacturers like Tata Motors, Mahindra Trucks and Buses, Ashok Leyland, Eicher, and BharatBenz are now in the final round of introducing BSVI trucks in January and February, and the price announcement likely to follow soon.
Even as the wider automotive sector is faced with a severe downturn for the last 10-12 months, the calendar year 2019 witnessed the domestic auto sales dropped sharply by 14%, the highest in the last two decades. One of the major factors impacting slower sales was the transition from BSIV to BSVI. Also, the supreme court decision to block the sale of BSIV vehicles after March 2020 has hit the sales the hardest.
While the vehicle manufacturers are working round the clock to get their BSVI production on schedule and make the vehicle available at the dealerships. At the same time, companies are looking to exhaust the BSIV stock before the financial year ends, as they consider minimizing the risk of unsold stock.
Pre-buying yet to kick-start
The much-anticipated pre-buying ahead of the new emission norms hasn’t picked-up, as everybody is awaiting the large fleet operators would start buying a bulk of the trucks to offset the cost increase once the BSVI regime takes off, which now likely to takes place in the last remaining weeks of January, followed by February and March of this financial year.
Globally, this trend is established as whenever a country makes a transition to new emission norms, the customer tends to buy earlier emission vehicles to escape the increase in the price of higher emission vehicles. However, due to sustained slowdown in the domestic market in India, a slump in the economic activities across the sector, lower freight moments raised doubts among fleet-operators who either postponed or all together shunned buying new trucks.
Eye on Union Budget
The commercial vehicle sales and, the trucks, in particular, are directly linked to the underline economic growth of the country. Hence, if the Indian economy grows by moderate rates, the auto sector will rebound. However, if the stress in the economy persists with slower industrial and manufacturing growth, then it may further aggravate the situation for vehicle sales.
The auto industry is pinning hopes on the upcoming union budgets with some announcement to simulate the economy. Also, the industry is demanding the long-standing expectation of a reduction in GST rate 18% for vehicles, and importantly a clear policy announcement of the much-awaited scrappage policy to drive the trucks demand. The industry is hoping that the scrappage policy would bring in some positive impact on truck sales.