Mumbai: Tata Motors Ltd and Ashok Leyland Ltd reported strong truck and bus sales in October because of an increase in construction activity that boosted demand for tippers.
Enforcement of an overloading ban in the states of Uttar Pradesh, Madhya Pradesh and Bihar also helped in increasing sales, said executives at the firms.
The demand for new trucks is mostly from owners who are replacing their older vehicles, said Mahantesh Sabarad, an analyst at Fortune Equity Brokers Ltd. “Most are staying clear of augmenting their fleets.” Moreover, relatively steady freight rates or truck rentals are also discouraging transporters to add to their fleet size.
Sales at Tata Motors, India’s biggest truck maker, gained 13% to 38,714 units in October from a year earlier.
Truck makers had sold fewer trucks and buses in October last year as fleet operators advanced their purchases to avoid the impact of an increase in prices of some models. Most manufacturers were forced to raise prices last year as they introduced models which could meet the new emission norms —Bharat Stage 3.
“The market has been steady despite a negative sentiment,” said Ravi Pisharody, president, commercial vehicles at Tata Motors. He said overall sales have been led by tippers, following a pick-up in construction activity, even as the industry has seen a slower offtake by the cargo segment.
“The tippers have grown much faster given non-availability of such vehicles last year resulting in pent-up demand, a good replacement demand and healthy road construction activity.” said Sridhar Chandrasekhar, head of CRISIL Research. Sales of Tata Motors’ light-commercial vehicles, however, expanded only 6%. The slower expansion was because the company lost production of at least 5,000 to 6,000 units at its Pantnagar factory in Uttarakhand, Pisharody said. Communal tension forced companies to shut factories in that area.
Ashok Leyland Ltd, the country’s second largest truck and bus maker, reported sales rose to 5,100 units from a year ago.
Sales at Delhi-based Eicher Motors rose 28% to 4,205 units, the company said in a statement. More than 90% of the trucks and buses in India are bought on credit. With the Reserve Bank of India increasing the rates for the 13th time since March 2010, loan rates for bus and truck purchases have steadily risen.
Shriram Transport Finance Co. Ltd, the largest financier of second-hand truck purchases, increased loan rates by 50 basis points in October alone. One basis point is 0.01%.
Overall demand for loans has been muted over the last five to six months, said Umesh Rawankar, deputy managing director at the firm.