MHCV demand picks up amid rebound in economic activities3 min read . Updated: 03 Dec 2020, 06:21 PM IST
- While the MHCV segment posted a 42% decline in volumes last fiscal, steepest year-on-year fall in at least a decade, volumes fell 76% during first half of FY21 due to the pandemic-induced crisis
Mumbai: Demand for medium and heavy commercial vehicles (MHCV), particularly heavy trucks weighing over 16 tons, has started picking up amid a rebound in economic activities, rise in freight transportation, and the government's investments in infrastructure projects, three senior industry executives told Mint.
The MHCV segment was the worst hit among all vehicle categories as demand started dwindling about two years ago when the IL&FS liquidity crisis emerged. While the MHCV segment posted a 42% decline in volumes last fiscal, steepest year-on-year fall in at least a decade, volumes fell 76% during first half of FY21 due to the pandemic-induced crisis.
However, India’s top two commercial vehicle (CV) manufacturers – Tata Motors Ltd and Ashok Leyland Ltd – are witnessing significant recovery in the demand for heavy trucks over the past two months.
In October, Tata Motors and Ashok Leyland saw a YoY growth of 3% and 13% to 5,033 units and 3,762 units respectively in MHCV trucks. Last month, Tata Motors sold 5,699 units of its MHCV trucks recording a 13% sequential growth, Ashok Leyland posted sales of 4,238 units, up 23% YoY.
While both companies are seeing offshoots of recovery in the MHCV trucks, also seen as a key indicator of economic activities, on the increased freight and commissioning of new infrastructure projects, Emkay Global Financial Services Ltd estimates this recovery could transform into a cyclical rally involving 24% growth in March quarter of this fiscal and about 66% growth in FY22 on replacement demand and higher industrial output.
“The recommencement of the construction activities post the nationwide lockdown and subsequent announcements of major projects by the central and state governments have fuelled the demand for the MHCV tipper trucks," RT Wasan, vice president, product line, MHCV, Tata Motors told Mint.
The tipper truck segment was among the first segments to show signs of demand recovery in the post-lockdown period, he said. Led by the pick up in construction and manufacturing activities over the past few months, the industry executives are also seeing recovery in cement and steel production, which is adding to the demand for heavy trucks.
“The announcement of the new construction activities like highways, bridges and tunnels, port connectivity and irrigation as well as mining-specific sectors such as coal and iron ore were imperative in the steady rise of the MHCV tipper segment," Wasan said on Wednesday.
Referring to the freight or cargo segment, he said, “Sectors like e-commerce, fast moving consumer goods and durables (FMCG and FMCD), pharmaceuticals, petroleum, oil and lubricants have contributed to the recovery while the surge in the demand for passenger vehicles has boosted the demand of car carriers," he said.
Gopal Mahadevan, chief financial officer at Ashok Leyland, had recently told Mint in an interview that the demand for MHCV trucks is expected to rebound on the back of economic recovery during second half of FY2021.
“Recovery in MHCV truck sales is in line with our expectations. It is driven by an uptick in the industrial activities, new construction projects and freight volumes. The toll collection data indicate that volumes have reached pre-covid levels," Shamsher Dewan, vice president, corporate sector ratings, Icra Ltd said.
According to Mitul Shah, head of research, Reliance Securities Ltd, the demand recovery for MHCV trucks was well supported by the robust agricultural output this year, which led to increased transportation of agri produce and agri-derived products, including FMCG.
“Also, last year CV manufacturers began reducing production of BSIV vehicles in order to avoid stock build up. The growth in MHCV volumes is expected to hold up at significant levels for the coming quarters. However, uncertainty around covid-19 persists," Shah said.