Home >Markets >Mark To Market >Tumbling US Class 8 trucks dent Bharat Forge and Motherson Sumi Systems
A screenshot of Bharat Forge’s website.
A screenshot of Bharat Forge’s website.

Tumbling US Class 8 trucks dent Bharat Forge and Motherson Sumi Systems

  • US Class 8 orders fall 57% in April, the sixth consecutive month of sales drop, which began with a 14.5% y-o-y drop in November
  • The steady drop in Class 8 truck orders is a bad news for Indian auto component firms that supply to US markets

The steady fall in US Class 8 trucks orders bodes a slowdown in US commercial vehicle (CV) sales. Importantly, it signals a slowdown in growth for India’s component makers such as Bharat Forge Ltd and Motherson Sumi Systems Ltd.

April data from America’s Commercial Transport (ACT) Research Co. shows a 57% year-on-year (y-o-y) drop in US Class 8 orders. This is the sixth consecutive month of sales drop, which began with a 14.5% y-o-y drop in November. Even then, heady double-digit growth in the first six months of FY19 helped close the year with a 23% rise over the previous one.

However, the industry forecasts a flat growth in the current FY20. According to a note by Nomura Research, “Contracting freight volumes, falling freight rates and strong Class 8 capacity additions will lead to a supply-demand imbalance towards the end of the year."

This is bad news for Indian auto component firms that supply to US markets. Among them, Bharat Forge and Motherson have roughly 20% and about 8% of their revenue, respectively, accruing from this segment. Meanwhile, the former may see an adverse impact from slowing growth in domestic CV sales, as a significant part of their revenue comes from this segment here.

It is hardly surprising therefore that the shares of both component makers have taken a beating. Bharat Forge is down 17%, while Motherson has lost 14% in comparison to the Nifty 500 index that appreciated 5% from December till date. Valuations may continue to be under pressure along with falling truck orders.


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