Truck sales continue to slide, February record sharp decline

The month-on-month truck sales stay negative as the lack of pre-buying ahead of the new emission and muted replacement demand from fleet operators weighed heavily on sales.

The truck sales show no sign of recovery as customers are staying away from buying new trucks. The slower than expected uptick in the overall economy and lack of confidence in business growth discouraging truck buyer from fresh purchases. The industry was expecting pre-buying to take place in the last three months of FY20 and hence some boost to demand, which has not happened. Also, the replacement demand from some large-fleet customers almost negligible, thus dragging the sales down tremendously.  However, one positive aspect of the absence of pre-buying ahead of the new emission norms is that perhaps the first quarter of FY21 may not see a higher dip as the prolong delay in buying new trucks over the last few months would prompt new purchases. Tata Motors, Ashok Leyland, M&M, VECV reported their February truck sales considerably down.  

Also, OEMs are working towards exhausting all the BSIV stock from the retail distribution before the end of March, and this will enable them to stop production of BSIV trucks and also rationalize the inventory to avoid the unsold stock.

Speaking on the company’s performance in the month, Girish Wagh, President, Commercial Vehicles Business Unit, Tata Motors said, “Commercial vehicle domestic sales in February 2020 was ~35% lower than last year. Retail in February was ahead of wholesale by 37%, helping bring down stocks even further to an all-time low. Retail in M&HCV grew by 23% over last month with fleet buyers stepping up purchases. We are on track for the BSVI migration, with BSIV stocks being consumed as per plan and BSVI production initiated. The supply disruptions from the COVID-19 outbreak in China could have some impact on the BSVI transition and all efforts are underway to mitigate it”

Veejay Ram Nakra, Chief of Sales and Marketing, Automotive Division, M&M, said, “The ramp-down of BSIV vehicle production has been in line with our plan for February. However, because of the unforeseeable challenges on the parts-supply from China, our BS VI ramp-up has been affected. This has resulted in a high de-growth in our billing volume for February and our dealer inventory is, now, under 10 days. Going into March, we anticipate the challenge on parts-supply to continue for another few weeks, before we get back to normalcy.”

Truck Rental Trends

According to the Indian Foundation of Transport Research and Training (IFTRT), the truck rentals fell by 2-3% in February on key routes on the back of drop-in diesel price during current month by around Rs.1.98/lit as cargo offerings from factory gates remained flat due to ongoing economic slow-down, while on arrival of fruits and vegetables into APMCs across the country received bountiful of crops and still held on truck rentals from further falling in the open market.

According to IFTRT, the M&HCV goods carrier segment is under heavy pressure; the customers are uncertain on the shift from BS-IV to BS-VI as financers/bankers unwilling to fund new goods carriers, manufacturers cutting down the production contributed to steep fall in truck sales. IFTRT expects the next 2 quarters of the coming fiscal may take time for re-pick of goods carriers because very few sectors in the economy are displaying any significant recovery since coronavirus has added to the woes of the domestic economy.

OEMs sales in February  

The market leader Tata Motors' overall domestic commercial vehicle sales declined by 27% to 25,572 units in the month. (February 2019: 39,111 units). The M&HCV truck segment plunged by 46% to 6,739 units. (February 2019: 12,437 units). The ILCVs down by 33% with a total sale of 3,356 units, the cargo SCVs and pickups registered a fall of 30% to 12,135 units. The commercial passenger carrier (bus) segment declined 21% to 3,342 units. The company exported a total of 2,514 units in the month, a drop of 9%. In FY2020 till February, Tata Motors sold a total of 3,33,577 units down by 28%. (FY19: 4,63,241 units).

Ashok Leyland’s domestic sales down 39% to 10,612 units. (February 2019: 17,352 units). The M&HCVs sales tanked 47% to 6,745 units, the trucks were down 58% while the buses posted a gain of 36%, by selling 4,706 units and 2,039 units, respectively. The LCVs were down by 18% to 3,867 units (February 2019: 4,731). The total domestic sales for FY20 reported by Ashok Leyland is 1,14,504 units (-30%). FY’19:1,64,544 units.

Mahindra & Mahindra’s overall CV sales fell 25% to 15,856 units (February 2019: 21,154). The M&HCVs plunged 36% to 436 units. The below-3.5T GVW segment sold 14,991 units down 24%. (February 2019: 19,647), and those in the above-3.5T GVW segment were declined by 48 % with a sale of 429 units. M&M cumulative sales for FY20 till February 2020 is 1,96,810 units (-12%). (FY’19:2,24,178 units)

VE Commercial Vehicles domestic sales declined by 27 % in the month; the company sold 3,875 units in the domestic market. (February 2019: 5,337 units). The domestic sales for theFY’20 is down by 23.5% to 41,637 units.