Active Stocks
Fri Sep 22 2023 15:58:38
  1. Tata Steel share price
  2. 126.7 -0.86%
  1. HDFC Bank share price
  2. 1,529.2 -1.57%
  1. State Bank Of India share price
  2. 598.1 1.67%
  1. Power Grid Corporation Of India share price
  2. 199.1 -1.34%
  1. Tata Motors share price
  2. 621.1 -0.93%
Business News/ Market / Mark-to-market/  Morning may not show the day for FY19 truck sales

Sales of commercial vehicles flagged off FY2019 on an extraordinarily optimistic note, as they turned in a blockbuster growth for the month of April. Better still, it came after a strong 19% annual sales growth in FY2018—a rate of growth not seen in a decade.

Take market leader Tata Motors Ltd. April sales grew by a stupendous 208% year-on-year (yoy) in the medium and heavy commercial vehicles (MHCV) segment and by 91% in light commercial vehicles (LCV) segment. Second-largest manufacturer Ashok Leyland Ltd also worked wonders with a 98% and 45% growth in the two categories, respectively. Eicher Motors Ltd too clocked a stellar 68% yoy growth in MHCV sales.

This is not to say that the economy is in the pink of health. Truck rentals that normally drive truck sales have been erratic in the last few months. However, they have not sustained at higher levels in spite of rising fuel costs. Drop in agri-output due to freakish weather in some regions brought down truck rentals by a sharp 5.5% in April.

Why then the heady growth in sales? One of the key sales triggers is perhaps the overloading restrictions that have been stringently enforced in some states such as Uttar Pradesh and Rajasthan.

In its recent report, Edelweiss Securities Ltd says that its survey of the southern regions shows that about 40% of the truck fleet has been upgraded over the last three years. The rest too will gradually be replaced.

Besides, the current growth must be viewed against the backdrop of the huge drop in sales seen in the year-ago period (April 2017). At that time, the plethora of regulatory changes and compliances such as BS-IV emission norms, goods and services tax (GST) and even demonetisation had hurt demand as fleet operators chose to defer purchases until the dust settled down.

Some dealers explain that easy availability of finance with almost zero equity contribution needed from fleet operators, along with discounts, has fuelled replacement demand.

Of course, optimism among fleet operators also stems from heightened infrastructure activity and the prospects of another good monsoon that would spike economic activity.

But that said, risks loom ahead. Interest rates are unlikely to remain benign for long and fuel prices have been soaring too. Inability to pass on cost hikes would affect demand for new trucks.

Meanwhile, from the second half of the fiscal year, a higher base would lower growth rates too. Analysts’ forecast a low double-digit growth in FY2019 due to moderation in the second half, that too if rural buoyancy and infrastructure growth continue.

"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Updated: 07 May 2018, 12:43 PM IST
Next Story
Recommended For You
Switch to the Mint app for fast and personalized news - Get App