Commercial vehicle makers in India have mixed views on a potential spurt in sales of Bharat Stage IV medium and heavy commercial vehicles (M&HCVs) in the remainder of this fiscal year ahead of the implementation of more stringent emission norms.
Some of the biggest commercial vehicle makers—Tata Motors Ltd, Ashok Leyland, Volvo Eicher Commercial Vehicles Ltd and Scania—remain hopeful of advance purchases of BS-IV M&HCVs in the second half of FY20.
Daimler India and the Federation of Automobile Dealers Association (Fada) whose members include commercial vehicle dealers aren’t so optimistic.
Mint spoke to about a dozen stakeholders in the CV industry to ascertain their views on the commercial vehicle industry, which stands divided at the moment on the anticipated pre-buying of specifically medium and heavy trucks.
The CV makers had earlier projected advance buying of BS-IV vehicles to trigger an expected price rise under the BS-VI regime which will kick off from 1 April 2020. This, they hoped, would bring in much-needed relief for the industry, experiencing its worst sales slump in two decades.
However, key dealer partners, battling an abnormal build up of M&HCV stocks, don’t expect pre-buying of these trucks anytime soon.
Liquidation of existing inventory of BS-IV trucks by the 31 March deadline is also posing a stiff challenge for the dealers even as they continue to burn cash in the form of interest payments on loans to fund their unsold stocks.
BS-VI compliant M&HCVs are expected to cost 8-10% more than the existing BS-IV models.
In its retail and inventory data from July to August, Fada reported CV inventory build-up of up to 60 days. CV sales are estimated to have fallen about 24% year-on-year during the fiscal first half to 352,331 units. M&HCV sales plunged more than 60% in the September quarter on factory shutdowns, according to data issued by the companies.
Ashish Harsharaj Kale, president, Fada said while good monsoons will definitely drive pre-buying in the light commercial vehicle segment (LCVs), the real problem lies in the M&HCV space. “The pre-buy in M&HCVs will primarily depend upon the price differential (between BS-IV and BS-VI models). While pre-buying of tipper trucks would depend upon new projects awarded to the contractors, I don’t know if any pre-buying will happen in the 16-tonne and above multi-axle or haulage truck segment," said Kale, adding pre-buying may only happen if the subdued market demand picks up in November and December.
Also, unlike cars and two-wheelers, the festive season does not impact the M&HCV segment, Kale said.
“A truck operator will buy a new truck only if he sees guaranteed business or will have a new contract for 6-12 months of next fiscal," said Shamsher Dewan, vice president, Icra Ltd. Dewan estimates the M&HCV segment to comprise multi-axle or haulage trucks (45-50%), tipper trucks (25-30%) and tractor-trailers (25%). Of these, while construction activity drives demand for tipper trucks, freight movement impacts the haulage trucks, which was also affected by axle load norms introduced in July last year.
Under the new axle load norms, the government raised the permissible gross vehicle weight of over 16 tonne heavy trucks by about 12-25%, creating excess carrying capacity for fleet operators.
Vinod Aggarwal, managing director and chief executive, Volvo Eicher Commercial Vehicles, said he expects pre-buying on productivity push by large fleet operators as new trucks offer more carrying capacity besides better ergonomics. “Why would fleet operators who see business in H1FY21 not buy more affordable BS-IV trucks in Q4FY20?" he asked.