Commercial vehicles sales remain subdued in November

Commercial vehicles OEMs reported sales for November 2019; the market continues to remain subdued. All the manufacturer's sales for the month stays negative; however, the rate of decline has recovered slightly as month-on-month sales witnessed marginal recovery.

The overall slowdown in the Indian automotive market persists as sales across segments continue to drop YoY. This is reflective in the November months sales reported by Tata Motors, Ashok Leyland, M&M and VE Commercial Vehicles. The negative sentiment in the economy and lower business confidence is impacting the buying decision of large and small truck owners. However, the month-on-month sales point towards marginal recovery, yet OEMs pinning hopes on the pre-buying demand coming to the markets as the BS-VI deadline is just three months away.

The pre-buying ahead of the new emission standards likely to help lift the sales, yet, due to a prolonged downturn in the market, the pre-buying hasn’t kick-off yet against the early market anticipations. Some of the customers waiting to buy new trucks and already received good freight orders from corporate India will perhaps place sizable orders of trucks to circumvent the steep price rise post-BS-VI implementation. 

Speaking on the company’s performance in the month, Girish Wagh, President, Commercial Vehicles Business Unit, Tata Motors said, Girish Wagh, President, Commercial Vehicles Business Unit, Tata Motors Ltd., “As we move closer towards BSVI transition, focus continues to be gradual stock reduction, with retail sale in November being higher than wholesale by over 10%. Medium and Heavy Commercial vehicle sales grew by 23.6% over the previous month, as inquiries continue to increase gradually, with fleet owners realizing the economic benefits of replacement of their older vehicles. Overall system stocks being at a multi-quarter low, coupled with increasing inquiries for replacement demand, will help firm-up volumes and realizations in the next few months.”

Commenting on the performance, Veejay Ram Nakra, Chief of Sales and Marketing, Automotive Division, M&M, said, “The month post-festive season is historically a lean month for the automotive industry. Consumer demand, especially for passenger vehicles, typically picks up in the year-end that is in December. Therefore, we expect December to pan out better for the automotive industry.”

Truck Rental Trends

According to the Indian Foundation of Transport Research and Training (IFTRT), the truck rentals continued to slide on quarter to quarter basis, and November 2019 witnessed a 1.5%-2.0% drop in truck rentals on leading 75 trunk routes.

Truck rentals continued to slide on quarter to quarter basis. November 2019 witnessed a 1.5%-2.0% drop in truck rentals on leading 75 trunk routes.

While for the last 10 days, the international brent crude price has hardened by prevailing at $64/bbl and weakening to Rs.71.75/$, but its impact on likely hike in diesel price by domestic oil marketing companies may be passed on in the current December month. On the other hand, the diesel price has been hovering around Rs.65.80/ltr (ex-Delhi), still due to continuous slump in industrial and core sector activities and adverse procurement of fruit/vegetables and food items by 10%-15% except for vegetables like onions and potatoes where the supply has been down by 30%-40%.

Given the present gloom period, the recovery in the economy may take a much longer time than expected by the government. Most of the financial and economic measures announced by so far by the government seem yet to have a real impact on the economy

OEMs sales in November

The market leader Tata Motors' overall commercial vehicle sales declined by 19% to 30,588 units in the month. (November 2019: 37,957 units). The M&HCV truck segment dipped by 38% to 6,050 units. (November 2018: 9,793 units). The ILCVs down by 11% with a total sale of 3,611 units, the cargo SCVs and pickups registered a fall of just 3% to 15,787 units. The commercial passenger carrier (bus) segment declined 35% to 2,209 units. The company exported a total of 2,931 units in the month, a drop of 34%. In FY2020 till November, Tata Motors sold a total of 2,17,130 units down by 19%. (FY19: 305,395 units).

Ashok Leyland’s domestic sales declined by 25% to 9,377 units.  (November 2018: 12,570 units). The M&HCVs sales down by 36% to 5,321 units, the trucks were down 55% while the buses posted a gain of 196%, by selling 3,447 units and 1,874 units, respectively. The LCVs were down by 6% to 4,056 units (November 2018: 4,310). The total domestic sales for FY20 reported by Ashok Leyland is 82,706 units (-27%). FY’19:1,13,941 units.

Mahindra & Mahindra’s overall CV sales declined by 12% to 17,384 units (October 2018: 19,673). The M&HCVs dropped by 51% to 311 units. The below-3.5T GVW segment sold 16,700 units down 10%. (November 2018: 18,530), and those in the above-3.5T GVW segment were declined by 26 percent with a sale of 373 units. M&M cumulative sales for FY20 till November 2019 is 1,42,085 units (-13%). (FY’19:1,63,493 units)

VE Commercial Vehicles domestic sales declined by 22.8 % in the month; the company sold 2,948 units in the domestic market. (November 2018: 3,817 units). The domestic sales for the April-November for VE Commercial vehicles is down by 26.6% to 38,778 units.