Tuesday, March 28, 2017

Limited pre-buying of BS III vehicles disappoints truck-makers


Commercial vehicle manufacturers are disappointed as pre-buying of BS III truck sales ahead of costlier BS IV coming in from April 1 has belied expectations.
Slow business environment and the proposed shift to GST are cited as key reasons, for fleet operators postponing their new truck purchases, according to industry representatives and analysts.
With the transition to new emission norms from April 1, the CV industry expected pre-buying in this quarter as trucks could be costlier by 6-10 per cent.
Vinod Aggarwal, Managing Director and Chief Executive Officer of VE Commercial Vehicles (VECV), felt that pent-up demand due to demonetisation and modest pre-buying spurred sales in this quarter but it was not in the double digits.
Total truck volumes (medium and heavy duty segment) during January and February were up just four per cent at 51,733 units when compared with 49,842 units in the same period a year ago.
During November and December 2016, total sales were 33,873 units as against 41,181 units in the corresponding period previous year.
So, the recovery in demand was visible after the effects of demonetisation, but growth owing to pre-buying has been limited.
Among the CV makers, Ashok Leyland has been able to show better performance than others with 17 per cent growth at 18,560 units during first two months of 2017.
VECV registered four per cent growth at 5137 units. However, leader Tata Motors saw its sales drop four per cent at 26,100 units.
Key factors
Subrata Ray, Group Vice-President (Corporate Ratings), Icra, highlighted that weak cargo availability from industrial sectors and uncertainty related to effective taxation on CV industry under the GST regime contributed to slow down.
Meanwhile, uncertainty relating to sale of BS-III compliant vehicles post April 2017 has led to spike in industry-wide inventory levels. OEMs had scaled up production during this quarter, though sales have been below expectations. “The total inventory of CV makers is estimated at about 74,000 units, which is around 1.3 x the average monthly sales,” said Ray.
SP Singh, Co-ordinator, IFTRT (Indian Foundation of Transport Research and Training), stated that the trucking industry was feeling that the GST regime might create surplus fleet due to barrier-free and prepaid electronic tolling at toll plazas on highways.
Overall, CV industry is expected the end this fiscal with a marginal growth of 5-6 per cent against 11.5 per cent in the last year.

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