MUMBAI | NEW DELHI: Commercial vehicle (CVs) sales fell to the lowest in nearly seven and a half years in April, after a buying spree and overstocking in March ahead of a change in emission standards and the resultant price hike affected demand the following month. Top manufacturers were also hit by component shortages.
Commercial vehicle sales fell 23% in April to 41,490 units, the lowest since November 2009, when the volume was 40,855 units. Medium and heavy trucks posted a whopping 59% drop in sales to 8,194 units in April, while including buses, the decline was almost 55%. An expansion in small commercial vehicles and pickup in trucks slightly offset the overall impact.
Commercial vehicle sales are seen as a barometer of economic growth, but the performance last month has to do more with an extraordinary development, as industry executives put it, than macroeconomic factors.
A Supreme Court order towards the end of March making it compulsory to switch to Bharat Stage-IV emission regulations from April 1 caused a rush at dealerships in the last few days of March to buy vehicles conforming to BS-III standards, which were 8-10% cheaper than the BS-IV range.
Companies had already dumped their BS-III inventory at dealerships — artificially boosting the March numbers —as they hoped to get more time to dispose of the already manufactured vehicles, a plea the court, however, rejected. Sales reported by India’s vehicle industry are of factory dispatches and not retail volume.
“This is an unusual decline, in exceptional circumstances,” said Ravindra Pisharody, executive director for commercial vehicles at Tata Motors, the country’s largest truck maker.
The sector was affected by the Supreme Court judgement on BS-III sales, leading to the need for a higher quantity of BS-IV stock for April sales, Pisharody said. “The higher demand at a short notice was not met in production as vendors struggled to meet higher demand, especially in the M&HCV (medium and heavy commercial vehicle) segment.
Moreover, after the strong prebuying of BS-III vehicles in March, and the price increase of BS-IV vehicles, demand for BS-IV vehicles was also weak,” he added.
Tata Motors’ commercial vehicles sales in April fell 36% from a year earlier to 16,017 units.
Vinod Aggarwal, managing director at VE Commercial Vehicles, a joint venture between Volvo and Eicher, said the entire effort in April was to streamline sales which had happened in the last two days of March.
Getting those vehicles registered with state transport authorities took time, he said. “Besides, the suddenness of the decision banning sales and registration of BS-III vehicles post March 31 meant that some suppliers were not prepared to ramp up to BS-IV standards to the levels required.”
Much like the truck makers, the component vendor fraternity was stumped by the sudden ban on the sale of BSIII trucks.
According to people in the know, Tata Motors has not met even half its planned production in April due to a shortage of fuel pumps. Other truck makers, too, faced similar problems.
“It may take two to three months for supplies to get normalised,” said an executive at a truck maker.
Mahindra & Mahindra, one of the key drivers of the growth in small commercial vehicles, said there was no major impact on demand for small trucks, but unpredictability prevailed in the bigger truck space. The demand environment will remain challenging for the next few months, said Rajan Wadhera, managing director of Mahindra’s automotive business. “There is a lot of unpredictability in the market.”
Tata Motors is hopeful of a bounce back soon. The company expects commercial vehicle segment sales to grow 10-15% in the fiscal year that started in April, with a pickup starting in the second quarter.
Pisharody is betting on predictions of normal monsoon rains this year and favourable GST rates to drive sales, led by light commercial vehicles and buses. “M&HCV volumes are likely to gain momentum post the first quarter as customers will take some time to get accustomed with the new prices that companies will announce post BS-IV,” he said.