New Delhi: In the backdrop of a demand slowdown, sales of commercial vehicles will decline 10-12% in the current financial year, and manufacturers should expect limited pre-buying by fleet owners before the implementation of Bharat Stage VI emission norms, credit rating firm ICRA said on Monday.
The slowdown in the domestic commercial vehicle industry, which started in later half of FY2019, has continued in the current fiscal, with volumes falling 19% year-on-year during April-August. The contraction has worsened as the year progressed, with commercial vehicle manufactures cutting down wholesale dispatches by a steep 33% during July-August compared with a 10% cut in April-June, the rating agency said in a note.
Sales of commercial vehicles have remained subdued in the last one year due to increased efficiency of trucks because of increased freight carrying capacity and implementation of e-way bill and Goods and Services Tax. Reduced freight from manufacturing and infrastructure sector has led to a fall in the income of fleet owners which have also hit demand for such vehicles.
“The M&HCV (Truck) segment has been impacted by the double-whammy of excess capacity along with subdued freight availability, which has suppressed freight rates and kept profitability of fleet operators under pressure. Coupled with tight liquidity in the NBFC space, and expectations of a GST rate cut, fleet operators had deferred their vehicle purchases in the current scenario," said Shamsher Dewan, vice president, ICRA Ratings.
Apart from the lack of demand, reduced financing options available from the non banking finance companies (NBFCs) in the aftermath of crisis at shadow-banking behemoth Infrastructure Leasing & Financial Services Ltd, have also kept fleet owners from the market.