Indian commercial vehicle industry sales analysis and trends forecast – October 2019

The commercial vehicle sales in October 2019 remain gloomy, as all segments of CVs continue to fall year-on-year, the heavy trucks declined sharply. No festive cheers for the industry in the month, along with lower freight demand drag truck sales and inch the industry towards an uncertain future. We deep dive into the sales trends of the month, segment performance and the near-term outlook of truck sales in India.

The overall sales numbers reported by the industry body SIAM for the month of October implies a persisting slowdown in the overall automotive industry. Though, some respite in the passenger vehicles segment with a marginal growth on a year-on-year basis. The other segments of the industry stay on in the negative territory, without any clear sign of revival in sight.

The commercial vehicles segment maintains a higher YoY drop, the medium and heavy commercial vehicles (M&HCV) registered a decrease of over 50% in the month, the LCVs also down by 23%. The heavy-duty truck segment is still under severe stress with 55% degrowth in the month, this is where the overall slowdown in the economy is preventing any revival in demand. Amidst this slowdown, SIAM is anticipating better sales in the following months of the current fiscal.     

SLOWING ECONOMY

All the key factors point towards a slower economy which now impacting the transportation industry, as the shipments to carry across the country, are sharply declining. The recent data from the Central Statistics Office (CSO) isn’t really encouraging at all. The factory output fell by 4.3% in September hitting a multi-year low. There is negative growth in vital sectors of manufacturing, mining, and electricity which brought down the Index Industrial Production (IIP) in September. In the April-September of 2019 period, the IIP posted just 1.3% growth. Nearly 17 industry verticals in the manufacturing segment registered a dip in September, which essentially contributes significantly to the growth.

CSO data points the growth rates in September 2019 over September 2018, the primary goods-(-5.1%), capital goods (-20.7%), intermediate goods (7.0%) and infrastructure/ construction Goods (- 6.4 %). The consumer durables and consumer non-durables have recorded growth of (-9.9%) and (-0.4%) respectively.   

PRODUCTION

The October production figures remain muted with over 45% fall as compared to the same month last year. However, lower production month-on-month to beat the slowdown with partial plant shut-down, OEMs are successfully been able to rationalise the inventory across the distribution channel. This is a positive step for the industry to reduce the oversupply at the dealer's ends. The total commercial vehicle production in the month recorded 58,947 units. (October 2018: 1,08,135 units).

Tata Motors production dropped to 23,948 units (-52%), Mahindra & Mahindra to 22,099 (-16.1%), Ashok Leyland to 5,763 (-70.8%) and VE Commercial Vehicles to 3,437 (-45.3) The M&HCV goods carrier segment production declined by 76.7% to 9,567 units and the passenger vehicle segment back on some strong demand seems to be recovering as its production dipped only single-digit to 5.3% to 2,429 units. The passenger and goods carrier of LCVs production dropped by 38.8% and 26.4% respectively to 2,264 units. and 44,624 units. 

DOMESTIC SALE

Following the last few month's massive slump in sales, October commercial vehicle sales turned out to be no different as the industry continues to suffer from lower sales across the board. The depressing sentiments in the economy haven’t really seen any reversal, thus impacting the demand for trucks. In the domestic market, the overall CV sales remain negative with a double-digit fall of 23.3% in the month to 66,763 units. (October 2018: 87,067 units). The heavy truck segment recorded a sale of 12,797 units down by 54.9%, and the passenger carrier segment turned positive in the month to 2,527 units up by 7.5%. The LCV passenger and goods carrier segments posted sales of 2,417 units and 49,022 units in the month down by 10.2% and 8.5% respectively. ​​

OEMs sales remain under strain as the month-on-month drop persists, however, the fall seems to be narrowing down though gradually, offering some relief to the manufacturers. Tata Motors sold a told of 25,862 units in the month. (-32%). Mahindra & Mahindra reported a total sale of 23,582. (-3.1%), this is far greater than the double-digit fall over the last few months. Ashok Leyland’s sales decreased to 9,079 units (-36.6%).VE Commercial Vehicles recorded a dip of 35.3% to 3,309 units. Force Motors and SML Isuzu have sold 1,451 and 494 units respectively in the month down by about 9.7% and 36.9%. Maruti Suzuki sold 2,429 units of its Super Carry, up12.8% and the only OEM registered a growth the falling CV market.  

EXPORT

The total exports of commercial vehicles declined by 40.6% in the month to 4,752 units. All the OEMs exports look increasingly low as demand in the traditional overseas countries such as SAARC, Middle East, Africa, and Southeast Asian appears weak. Domestic market leader Tata Motors shipped a total of 1,939 units in the month (-55%), M&M exported 1,360 units (-19.3%), Ashok Leyland- 783 units (-3%), and VECV-372 units (-47%).

CONCLUSION

While several economic statistics are showing weak demand across the country, key sectors of the economy are also witnessing a multi-year fall. As a result, the impact is evident on the weak movement of freight across the country, and hence fleet operators are postponing big purchases. This coupled with the absence of pre-buying ahead of the new emission is also holding the truck sales back. It is now widely expected that the pre-buy may occur towards the end of the FY '19-20, most likely February or March 2020, yet there is no certainty unless the economy shows some buoyancy. Until then, the truck sale is unlikely to see some significant recovery.