Falling Truck Sales Worries Investors, Experts Still Hopeful
Published On Sep 08, 2016
Decreasing truck sales have cast a pall of gloom over the trucking industry. After a good start at the beginning of this financial year, sales have gradually declined over the first quarter, dropping by 7.6 percent in July 2016. This has not only worried investors involved in the segment, but has also cast a spell of doubt on the economic recovery of the commercial vehicle industry.
Two leading commercial vehicle manufacturers, Tata Motors and Ashok Leyland have reported drastic drop in sales of medium and heavy commercial vehicles (M&HCVs). Trouble started brewing as early as May when sales of Tata Motors started dwindling. In August, Tata reported a 17 percent drop and Ashok Leyland registered a decline of 7.9 percent on a YoY basis.
This fall comes after a steady growth since the last two years, raising questions on the prospects for economic recovery. Experts say that the growth was fueled by replacement demand, which was driven by four years of dormancy.
As development of the economy is also related to the automobile segment, this downfall of the M&HCV sector raises questions about the economic recovery. Also, segments which have dependency on commercial vehicles such mining and construction have not made a full comeback yet, and investments still have not picked up in sectors that back consumption demand. Furthermore, even though there has been a fall in diesel prices twice during the last month, truck rentals remain constant. Adding to this, a heavy monsoon has slowed down the movement of goods, obstructing demand for truck rentals.
However, experts are pinning their hopes on heavy demand for consumer goods after monsoon and pre-buying before the BS-IV emission norms. Also, it is anticipated that fleet owners are waiting for the approaching festive season in order to buy new vehicles. These predictions are backed by the ICRA, an Indian credit rating agency, which says that the second half of the financial year 2017 will witness rise in sales of commercial vehicles due to the above factors.
