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Medium and heavy truck sales hit a bump this fiscal

businesspaper Updated: Aug 03, 2016 08:05 IST
Hindustantimes

MUMBAI: After reporting strong double-digit volume growth over the last two years, sales of medium and heavy commercial vehicles (MHCV) seem to have hit a speed bump in recent months, with Tata Motors and Ashok Leyland reporting a sales dip in July.

The two companies command over 75% marketshare in India’s commercial vehicle (CV) market, the performance of which generally reflects the performance of the overall economy.

Tata Motors, the country’s top CV maker, reported 9% year-on-year drop in MHCV sales in July to 10,698 units. Sales in June had declined 11%. So far, over April-July Tata’s sale in the segment have gone up 4% to 45,799 units, against a 19% spike in the same period a year ago.

Similarly, Ashok Leyland’s MHCV sales last month slipped 7% to 8,182 units, after an 8% rise in June. The second-largest truck and busmaker’s segment sales over April-July were up only 6% at 32,209 units against 46% last year.

“The MHCV industry has shown subdued demand in June and July due to lower freight availability and flooding in some states. MHCV industry sales for cargo vehicles were also affected with replacement demand slowing down,” Tata Motors said.

A mail sent to Ashok Leyland remained unanswered. But in an interaction with HT in July, CFO Gopal Mahadevan had expressed confidence of CV sales rising 15-20% this fiscal.

Analysts reckon that over the last two years, demand was supported largely by operators looking to replace their fleets, while underlying growth was only 7-8%. “We believe these are early signs of slowdown and volumes could weaken significantly if replacement demand comes off,” said Hitesh Goel of Kotak Institutional Equities.

Moreover, there was a lot of pre-buying in the first half of the last fiscal before mandatory ABS (anti-lock braking system) norms came into effect from October 1, 2015. This means it will difficult to replicate similar growth.