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

Notwithstanding the industry’s hope of a partial revival, the commercial vehicle sales in September declined sharply with no pressing sign of recovery. The negative consumer sentiments and slowdown in the overall economy is impacting the transportation industry, as a result, new truck sale stays in the slow lane. Amid a prolonged slump, the month-on-month sales reveal some optimism as festive demand along with government announcements seems to have inspired some confidence in the minds of customers. Here is our thorough truck sales analysis and industry scenario for September’19.

The commercial vehicle sector, the true reflection of the underlying economic growth of India points towards a rather bleak economic picture. The automobile sales across segments are touching a new low month after month. There is a visible contraction in overall economic activities in India, largely focussed on private consumption and industrial capital expenditure. Private sector investments remain tepid in areas of industrial capital expenditure, public-private partnerships, construction, and infrastructure. The government's recent policy announcements including the reduction in corporate tax and pumping liquidity in the system is positive for the larger industrial activities in the economy.  Reports also suggest that there are several infrastructure projects are on the standstill, if these projects start to shape-up, it can spur investments and jobs in the country.

The consistent declining sales is attributed to several factors, thus any single action unlikely to produce significant results. The government is doing whatever it can to address policy issues, stimulating the demand, and the industry is trying its best in bringing back the consumer interest in buying new vehicles. The commercial vehicle sector which largely depends on the economic situation is eagerly waiting for a revival in demand, and the pre-buying ahead of the BS-VI norms kicking off from April 2020.  

SIAM Review

In its Q2 review, SIAM pointed out that small commercial vehicles and pickups sales were impacted on a drop in consumer durable sales and flat growth in crop production. The fall in GDP growth rate to 6 years low and axle norms increasing freight capacity of trucks by 25% has resulted in lowering fleet addition has impacted M&HCVs goods carrier sales. Similarly, passenger vehicles (buses) sales were impacted due to the slowdown in the procurement of buses by state transport undertakings and the permit for private hiring.

According to SIAM, the government’s focus on the revival of the economy, good incentivise scrappage policy, BS-VI pre-buying, road projects and infrastructure, normal monsoon after six years are some of the positives for the auto industry. However, the challenges such as no GST benefits on IC engine vehicles, lower consumer sentiments in the short-term, inventory liquidation, availability and affordability of finance and fuel price volatility continue to hurt the industry.

Truck Rental Trends

Indian Foundation of Transport Research and Training (IFTRT) in its monthly truck rental trends says, “Extended heavy monsoons in different parts of the country have crippled trucking business on intra-State and inter-State routes, but still truck rentals have gone up by 3%-4% last month in Sept 2019 due to sharp jump in international brent crude price from $60-$66/bbl leading to Rs.2/ltr rise in diesel price in last 15-20 days and hence truck rentals have moved up by 3%-4% on trunk routes due to cost-push.”

According to IFTRT, the trucking industry is weathering the storm of deep economic slowdown and hence present truck fleet population is standing idle to the extent of 25%-30% leading to truckers failing to repay their monthly EMIs resulting in repossession by financers in which most severely hit has been the motor vehicle carriers, LPG carrier and cement movers and loaders.

“With not much-touted pre-buying of BS-IV trucks insight and weak economy pulling down truck sales by more than 50% in Sept 2019 due to economic slowdown, the freight market and truck sales do not look to be shooting up in next 2-3 quarters. As a matter of fact, BS-VI introduction from April 2020 across the country to has added to great uncertainty within the truck manufacturing in the country and stakeholders are keeping their fingers crossed”, says IFTRT.

FADA remain guarded

The Federation of Automobile Dealers Associations (FADA) in its September’19 release said, “The September auto registration falls to a newer low and continues to reflect weakness in customer sentiment even with the onset of festival Season and never seen before discounts. Continuance of heavy monsoons and complete shraddh period within the month also contribute to subdued retails. On a YoY basis, overall vehicle registrations fell by -12.9%. 2-Wheeler was down by -12.1%, CV was down by -18.5%, PV reduced by -20.1% and 3W saw a marginal growth of 1.8%.”

According to Ashish Harsharaj Kale, FADA President, “FADA believed September to be a transition month into positivity with continued monsoon and measure after measures being announced by the government. The auto industry retails were under pressure during the month and the de-growth was on expected lines.”

“Overall improvement in sentiment and confidence can be seen across our members as retail liquidity eases and with improving retails, dealer liquidity will also soon see improvement. October will be a crucial month which will indicate the trends for H2 and measure the effects of an abundant monsoon and the various government measures. Dealers confidence and current trends indicate an improving situation and if these trends hold good, it could be an indicator of the Slowdown Bottoming Out and stability returning to auto retails”, explains Kale.  

Production

The overall commercial vehicle production in the month of September declined by 46.36% as compared to the same month last year. The industry produced a total of 54,532 units in the month. (September 2018: 1,01,658 units). Top manufacturers including Tata Motors, Mahindra & Mahindra, Ashok Leyland and VE Commercial Vehicles have seen the production numbers slipped by 49.92%, 18.42%, 73%, and 51.01% respectively in the month. In the major segments, production numbers saw a massive drop in the month. The M&HCV segment goods carrier segment declined by 75.36%, and the passenger vehicle registered a drop of 19.56%. The overall LCV segment down by 26.65 % compared to the same period last year.

Domestic Sales

All the truck makers were anxiously anticipating that the sales will see some positive trends in September, however, this month too, saw heavy fall in the overall sales across segments as the entire automotive sector remains under intense pressure. It was widely projected that the pre-buying and festive demand will push the demand, yet the numbers suggest that the truck buyers are not finding enough reasons to buy new trucks.

The overall negative sentiments in the economy seem to persist which has failed to lift the mood in the country, as truck buyers remain cautious. The total CV sales declined from 39.09 in September to 58,373 units. (September 2018:95,840). The critical M&HCV goods carrier segments consist bulk of heavy trucks declined 65.13% to 12,650 units, and the passenger carrier segment down by 25.58 % to 2,159 units. The LCV passenger and goods carrier segments registered negative growth of 18.93% and 23.37% to 2,616 and 40,948 units respectively in the month. ​​

In this enormously poor sale, truck manufacturers' monthly numbers are falling considerably. They are trying hard to fight back with attractive offers to customers as well as by making the truck buying process easy. Yet, the manufacturers are facing the challenge of falling sales and trying to realign the production schedule along with reasonable inventory with the dealers.

The month-on-month sales of OEMs are clearly indicating the huge drop, market leader Tata Motors overall sales in the domestic market declined by 45.17%, the company sold total 24,183 units in September’19 (September 2018: 44,107 units) with a market share of 41.43%. Mahindra & Mahindra reported a total sale of 18,872 units in the month down 17.65% (September 2018: 22,917 units), it's market share is 32.33 % in the overall CV segment. Ashok Leyland registered a total sale of 7,851 units in the month down by 56.57% with a market share of 13.45%. VE Commercial Vehicles with a market share of 5.38% in September sold a total of 3,140 units in the month down 44.77% (September 2018: 5,685 units).

Force Motors and SML Isuzu both the companies operate in a limited segment of the CV sector have sold 1,220 and 510 units respectively in the month down by about 4.98% and 46.09% in the month as compared to the same period last month. Maruti Suzuki sold 2,046 units of its Super Carry which is almost flat compared to the same month last year, the company has a market share of 3.51%.  

Exports

While the domestic CV market remains weak, Indian OEMs are now increasingly tapping opportunities in the export markets. Truck makers are expanding their footprints into different geographies in markets such as the traditional SAARC, Middle East, Africa and Southeast Asian markets. Yet, the export volumes are still tiny as the domestic market dominates with the bulk of the sales volumes. However, to safeguard sales and productions, better equipped to face the cyclicality of the domestic market, companies are steadily trying to get a strong footing in the overseas markets, both by expanding network, assembly operation or through local partnerships.

All the major players including Tata Motors, Ashok Leyland, Mahindra & Mahindra and VE Commercial Vehicles are aggressively exploring the different export markets for both trucks and buses. Like the domestic markets, the export markets are continuing to decline, thus not helping OEMs either. In September’19, a total of 7,062 units of CVs have been shipped to different markets, down by 29.53%. (September 2018:10,021). A total of 2,666 units of M&HCV and 4,396 units of LCV have been exported in the month. If Indian truck makers keep their sustain focus on export markets by bringing strong products and brand building, this can become a better opportunity to expand the market as well as acquire a greater slice of the local markets, especially, the Middle East and Africa.    

Conclusion

​The September truck sales touch another new low for the manufacturers, hence pointing towards a clear sign of the weak consumer sentiments. The first half of April-September FY19-20 has been the toughest for the auto industry as sales across segments have hit hard. The commercial vehicles sector has declined by 22.95% in H1 FY '19-20 to a total of 3,75,480 units. (April-September 2018-19:4,87,319 units). The M&HCVs segment which comprises the heavy trucks plunged 35.79% and the LCVs dropped by 14.69% during the first half of this fiscal.

This clearly shows the acute slowdown in the economy and pressure on the Indian transportation industry. Trucks buyers are waiting for revival before making a new truck purchase decision.  The sales trends of October will be crucial which will indicate the trends for H2, the positive impact of monsoon and the various government measures towards stimulating the economy. FADA expects retail sales to be higher in October which will help dealers to correct it to a reasonable level before the transition to BS-VI. While Commercial Vehicles showed a slight reduction in inventory, Passenger Vehicles which was nearing FADA recommended a range of 21 days changed directions in anticipation of higher festival sales.

In summary, the next few months are likely to be volatile for the automotive sector, and the impact of policy announcements and regulatory issues will determine recovery in the commercial vehicle sector.