Truck sales at Tata Motors, Ashok Leyland and Eicher Motors fell 18.2%, 3.2% and 0.4%, respectively in Febuary
Analysts expect contraction in truck sales, which started due to new axle-load norms, to continue for two more quarters
If yield expectations on any investment avenue are on the decline, investors are likely to stay away. The same logic applies to truck rentals and truck sales. Truck rentals, one of the key indicators of future truck sales, fell 3% on key routes in February. This makes it the fourth straight month of decline, making the outlook for medium and heavy commercial vehicle sales appear dim.
Truck sales have been falling. In February, Tata Motors Ltd, the largest truckmaker in the country, reported an 18.2% year-on-year drop in local truck sales, while that of Ashok Leyland Ltd fell by 3.2%. Eicher Motors Ltd’s sales in the segment contracted too, albeit marginally by 0.4%.
The aim was to reduce the logistics cost and prevent overloading. The collateral damage, however, has been a drop in truck sales.
What has also added to the woes of truck manufacturers is the subdued movement of goods in the last few months. There has been a 10-15% reduction in movement of food and farm produce supplies to wholesale markets in February, according to the Indian Foundation of Transport Research and Training. Factory dispatches, especially from small and medium enterprises (SMEs), also declined.
The fallout of weak truck rentals amid rising fuel prices is that it may lead to higher loan delinquencies. This can have a spillover effect on sales as well.
Truck sales are trending lower, with northern and western markets worse off compared to the south. Shares of Ashok Leyland, which gets most of its revenue from truck sales, have fallen hard before inching up in the last few trading sessions.
Analysts expect the contraction in truck sales to continue for another two quarters. “We expect recovery only in Q3FY20, which will be triggered by some buying ahead of the BS-VI norms that will be effective from 1 April 2020. These norms will lead to a significant increase in overall truck costs and owners may buy trucks earlier to circumvent the increase in prices," said Gianani of Sharekhan.
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