BS-VI norms to create headwinds for commercial vehicle segment: Ind-Ra

Topics BS VI | BS VI norms | BS VI fuel

Tating agency believes the pre-buying of BS-IV CVs till end of the fourth quarter of the current fiscal is unlikely to be meaningful

Rating agency India Ratings and Research on Wednesday said the implementation of the BS VI emission norms from April 1, 2020 could create short-term headwinds for the commercial vehicle (CV) segment.

Considering the sharp year-on-year fall in the sales volumes of CVs, especially since May 2019, the underwhelming pace of industrial activity and the higher cost of ownership of a BS-VI compliant CV, the implementation of BS-VI could add to the sector's woes, India Ratings and Research said in a statement.

Besides, given the excess supply and muted demand-side fundamentals in the economy, the rating agency believes the pre-buying of BS-IV CVs till end of the fourth quarter of the current fiscal is unlikely to be meaningful as compared with the earlier occasions when new emission norms had been implemented, it added.

For fleet owners, the ownership of BS-VI vehicle would be credit neutral as the benefits from fuel efficiency and maintenance would largely be offset by higher debt repayments, it said.

The revised axle load norms led to inorganic capacity expansion in the system while demand-side fundamentals have remained fairly muted as evident from the decline in the index of industrial production and the decrease in the aggregate volumes of manufacturing companies, it noted.

"Demand for CVs would remain challenged in the near term by the slowing growth of industries and the economy in general as well as by the impact of the extended monsoon on agricultural produce and rural demand," India Ratings and Research said.

Assuming customers anticipate a revival in the economy and are offered incentives in the form of discounts, the agency believes the sector might witness moderate levels of pre-buying of BS-IV CVs. This, however, would lead to delays in the purchases of BS-VI CVs post April 1, 2020, it added.

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