On 23rd May 2012 i was in Mumbai and chanced upon this article which sums up the mood in the industry. Here's a look. This article strengthens what i had said in my last blog.
Copyright DNA.
Yuga Chaudhari & Amritha Pillay l MUMBAI
The slowdown in the heavy-duty commercial vehicle (CV)
segment is expected to continue for up to six months. Experts said that sales had peaked in early March when some
prospective buyers, encouraged by higher discounts but fearful of
Budget-related price hikes, went ahead with their purchases. As vehicle prices rose post-Budget due to excise hike, other
large fleet operators and individual buyers have been delaying their purchases,
said analysts and transporters.
The drop in freight rates led to a further drop in heavy
truck sales in April. According to the Society of Indian Automobile
Manufacturers (SIAM), the CV segment grew 4.37% on year in April. In contrast,
medium and heavy commercial vehicles (M&HCVs) de-grew 11.60%.
A similar story obtains elsewhere. The Indian Foundation of
Transport Research and Training (IFTRT) said truck chassis sales were down
15.3% on-year in March 2012 due to withdrawal of excise stimulus from CVs.
More importantly, the heavy CV / trailer segment (16-40
tonne range) witnessed 24.3-34.6% drop in sales during April 2012. An IFTRT
report attributed this decline to the “5% drop in truck freight rentals on
trunk routes” and “indiscriminate fleet expansion of high tonnage multi-axle
trucks” during the last quarter to March. Again, heavy buying in the truck
chassis segment preceded the much-anticipated excise hike in the Budget. The
subsequent 5% excise hike pushed prices up by `60,000-80,000 on different
variants.
“M&HCV truck sales in April have been sluggish as a
result of slowing macro indicators,” said a Tata Motors spokesperson. GDP,
industrial production, 3-5 % rise in vehicle prices, pre-Budget buying in
March, the market taking time to transition to new prices… all these factors
played a part, he said. Although April generally tends to be slack for truck-makers,
this year proved worse than previous years.
“The sales are expected to remain under pressure at least
for the next four or six months till segments like infrastructure and agri
commodities revive. Pre-Budget buying during the first quarter of this calendar
year has taken care of the demand for the next six months at least,” said
Surjit Singh Arora, analyst with Prabhudas Lilladher, a Mumbai-based brokerage.
To somehow overcome sluggish sales, truck-makers have been
offering discounts. “We see more discounts from various manufacturers going
ahead. However, we are conservative as far as discounts in the medium and heavy
truck segments are concerned. In the heavy duty segment, we are also participating
with other players and offering larger discounts,” said an Eicher Motors
official during an earnings call.
Supply chain firms and large fleet operators are still
bullish about the industry and hopeful that sales will revive after
September-October, when industrial activity reaches its peak.
Vineet Agarwal, joint MD of the Transport Corporation of
India (TCI), one of the major supply chain players, said: “The decline in
industrial growth has definitely affected business and thus movement across the
country. At the industry level, as business volumes are sluggish, purchases are
being postponed due to factors like rising interest rates. We expect some
significant growth in volumes only after there is some improvement in
industrial growth, which is expected only post August-September.”
TCI, however, is still positive about the market and will
continue to maintain its investment to last year’s level.
Lars Sorensen, CEO-South Asia of Damco, a freight forwarding
and supply chain company belonging to the APMoller Maersk Group, said: “We are
still very bullish and going ahead with our expansion plans chalked out three
years back. People are still concerned about the European and US markets. The
Indian market is also a concern. There is no clear trend. Some companies are in
a wait-and-watch mode.”
