Commercial vehicles, two-wheelers likely to see a smooth drive from H2

Commercial vehicles (CVs) and two-wheelers, after clocking big growth in January 2018, have reported a decline of 14.04 per cent and 16.06 per cent, respectively, in the same month this year over the equivalent period in 2019.

CVs and two-wheelers reported 39 per cent and 33 per cent growth, respectively, in January 2018 over the same month in 2017.

The two segments continue to feel the pressure of slowdown in rural sales and changes in regulations, among other things. 

Industry representatives have said from the second half of the year, they hope to see revival because the rural economy is looking up and the projects the government has announced.

According to the wholesale numbers Society of Indian Automobile Manufacturers has given, CV sales were 61,305 units in January 2017, 85,660 units in January 2018, and 87,591 units in January last year. However, they dropped to 75,289 units in January this year. 

Two-wheeler sales, which rose to 1.68 million in January 2018 from 1.26 million in January the previous year, started falling since January 2019 (1.59 million) to 1.34 million in January this year.

Factors that affected sales of CVs are: Slowdown in infrastructure spending, drops in freight rates, revised axle-load norms, goods and services tax rates, crisis in non-banking financial companies, and emission norms.

Ashok Leyland expects the M&HCV (medium and heavy commercial vehicle) industry would close 2019-20 with sales of around 200,000 units, a drop of nearly 46.23 per cent over last year. However, it hopes things should revive.

Vipin Sondhi, managing director and chief executive officer (CEO), Ashok Leyland, said the Union Budget’s allocation of ~2.83 trillion for agriculture, irrigation, and rural development would help CVs because it would lift the rural economy. The Budget’s proposal to spend ~100 trillion on infrastructure over five years would create demand for CVs.

Rajan Wadhera, president, SIAM, and president, (automotive sector), Mahindra & Mahindra, said “sales of vehicles continue to be stressed due to rising costs of vehicle ownership and slower growth in GDP. We are hopeful that the recent announcements of the government on infrastructure and rural economy would support the growth of vehicle sales, especially in commercial vehicles and two-wheelers”.

K N Radhakrishnan, TVS Motor president, CEO, and additional whole-time director, recently said in an investor call that while the first half (for two-wheelers) might see a decline, rural sentiment was positive, and agriculture should do well.

Niranjan Gupta, chief financial officer (CFO), Hero MotoCorp, said the two-wheeler industry continued to face challenges amid an overall economic slowdown. Early indicators, such as a positive rabi crop, augur well for the rural economy, which is likely to help the industry.

“We expect to see a turnaround in the second half of FY21),” said Gupta.

Motilal Oswal estimates 6 per cent volume growth for two-wheelers in 2020-21.

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