Demonetization Plays Havoc this Fiscal, M&HCV Growth to Remain Flat

As predicted by TrucksDekho earlier, the M&HCV segment is expected to remain flat this fiscal year (FY 2017). This has been depicted by ICRA in one of its studies which also highlights the highs and lows of each segment this fiscal. The major cause remains demonetization, whereas other events have had significant contributions to the fluctuating sales trend this year.

As per the study, the M&HCV segment is likely to report a marginal growth of zero to two percent in this FY 2016-17 fiscal due to several strong factors including demonetization. The effects of demonetization were clearly visible in the sales trends of November and December 2016 which witnessed a decline by 19.1 percent and 16.7 percent, respectively. However, the last quarter of this fiscal is expected to see a bit of uptrend because of the pre-buying before the BS-IV norms get implemented in April 1, 2017, resulting in flat sales this year.

The beginning of FY 2017 reported high sales numbers due to strong replacement demand which led to an encouraging growth of 13 percent in the first quarter of this year. However, after the end of the first quarter, demand for new trucks waned and sales were stagnated. Uncertainty with regard to the impact of GST added to the woes as fleet operators deferred buying new trucks with the hope that prices will fall once GST comes into picture.

Also, industrial activities faced a downturn this fiscal which led to low requirement of goods transportation, which in turn resulted in low rentals and purchasing activity. The worst came in the form of demonetization which led to a severe cash crunch and halted all kinds of truck buying activities.

However, the last quarter of this fiscal year to bring some respite and ICRA predicts that the overall CV industry will be registering a maximum growth of five to six percent as compared to the previous year.