A key reason for the fall in volumes has been the creation of surplus capacity due to new axle load norms. Analysts say bigger tonnage vehicles have been the worst impacted from the slowdown. Ashok Leyland
which gets more than half its volumes from the higher tonnage trucks saw a dip in market share due to this. The company has lost about 220 basis points market share given its volume skew towards higher tonnage trucks.
The pressure on volumes is expected to continue given the uncertainty surrounding infrastructure projects. After Andhra Pradesh, Maharashtra recently decided to review infrastructure projects worth Rs 2 trillion. Further, analysts believe that given the weak GDP print of 4.5 per cent for the September quarter, lower forecast for the year, and lack of capital expenditure by the private sector there may not be enough incentive for freight operators to buy additional trucks. This could hurt the BSIV pre-buying trigger that the sector was banking on.
Though there are near-term headwinds, analysts believe the Ashok Leyland
stock which is down nearly 30 per cent from year ago levels may not see a significant price correction from these levels. However, investors should not take an exposure to it given the uncertainties and little visibility on truck demand.