Commercial vehicle makers report zero sales in April amid Covid-19 lockdown

Mahindra commercial vehicles reported zero sales for the month of April 2020 as agaisnt 17,321 units in the same month last year.
Commercial vehicle (CV) makers except VE Commercial Vehicles (VECV) clocked zero sales in the domestic market during April, because of the lockdown.

 
 In comparison, tractor OEMs such as Mahindra & Mahindra, and Escorts, registered domestic volumes of 4,716 units (-83 per cent year-on-year) and 613 units (-88 per cent), respectively, with dealers restarting operations from April 20.

 
Ashok Leyland reported zero sales of M&HCVs, against 8,918 last year. LCV sales were also zero, against 4,223 last year. Total sales for April were nil, against 13,141 units last year. Mahindra CV sales were also nil, versus 17,321 units last year.

 
Only VECV reported sales, of 85 units, in both domestic and export markets.

 
“These are truly unprecedented times, and both the government and industry need to work more closely across the supply chain. The recovery of the auto industry is vital. For the first time ever in the history of the auto industry, we have seen a ‘zero sale’ month,” said Vipin Sondhi, MD and CEO of Ashok Leyland.

VECV’s manufacturing facilities and the entire supply chain, including the company’s dealerships, remained affected. The firm received permission to restart manufacturing at its Madhya Pradesh plant, allowing presence of only 25-30 per cent staff.

 
Tractor sales saw some traction, as agricultural activities were exempted from the lockdown. M&M’s farm equipment sector (FES) domestic sales stood at 4,716 units. Total tractor sales (domestic + exports) stood at 4,772 units.

 
Hemant Sikka, president of FES, said the extension of the lockdown impacted the business, with dealers partially open for just a few days.

 
For tractors, there are positives like a good Rabi output, opening of procurement centres, and indication of good crop prices, said Raghunandhan N I, analyst at Emkay Global.

 
Outlook

 
Sikka said the rate of improvement would depend on how quickly the on-ground sales operations including the start of NBFCs were normalised. In export markets, we have sold 56 tractors.

 
The rate of improvement for tractors will depend on ramp-up of on-ground sales operations and adequate finance availability. In tractors, 47 per cent of dealers have resumed operations. Dealer inventory stands at over 40 days in tractors, while it is 10 days in the auto segment.

Dealers have enough inventory to cover initial weeks of sale. A few manufacturing plants have received permissions, and are expected to re-commence operations in May, added Raghunandhan.

 
For CVs, Sondhi said: “It is imperative that demand for CVs be triggered. An incentive-based scrappage scheme (for commercial vehicles older than 15 years), with incentives in the form of a rebate in GST, road tax or registration charges would help give demand a boost.”

 
Freight demand will pick up once the lockdown is eased. At this time, an incentive-based scrappage policy will help customers acquire new trucks at lower prices. This will improve their operational efficiency, profitability, and cash position.

 
Today, 15-20 per cent of trucks on roads are older than 15 years. Even if these were replaced with new ones in 3-4 years, it will generate healthy demand for new trucks and lift the CV industry partially out of the slump.

 
The Society of Indian Automobile Manufacturers had earlier called for a temporary GST rate cut and the introduction of an incentive-based vehicle scrappage policy to revive the auto sector.

 
To start operations, industry will have to look at a structured opening of the lockdown to facilitate supply chain. Auto OEMs are dependent on the ancillary sector. A smooth flow of the complete supply chain is vital, said Sondhi.

 


Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel