GST to keep CV sales in the fast lane
GST to keep CV sales in the fast lane. Rules against overloading, too, to help drive demand as fleet owners look to replace older vehicles.
Sales of medium and heavy commercial vehicles (CV Sales) are set to reach a new high this financial year and continue the growth momentum into next year, with the positive rub-off from the government’s infrastructure push and implementation of GST, as well as strict enforcement of rules against overloading driving demand.
Sales of commercial vehicles in the 16-49-tonne category this fiscal year are set to top the record of 245,000 units achieved in 2011-12, industry executives estimate. In construction equipment, sales are expected to cross the 50,000-unit mark for the first time and be as much as 55,000 units, thanks primarily to the rapid pace at which the country is building highways and other infrastructure.
Commercial vehicle sales, particularly of higher tonnage trucks, are seen as an indicator of economic activity. The strong showing by the sector and expectations among industry executives for the momentum to continue into the next year and beyond bode well for the government, at a time when it is striving to push economic growth with just over a year remaining for elections.
“The next two years look positive for the truck industry,” said Anuj Kathuria, head of the global trucks segment at Ashok Leyland, the nation’s second largest maker of CVs. “The continued expenses on infra, housing and other major projects are bound to create good demand. Schemes such as Sagar Mala, freight corridor construction, smart cities, etc., will require commodity movement, which will drive vehicle demand.”
The drive against overloaded trucks, which have been a common sight on India’s highways, is making operators to purchase new vehicles, said executives. Another boon is the scrapping of check posts on state borders after GST created a national market by subsuming several state and central taxes.
“Enforcement of overloading restrictions and optimisation of warehousing solutions post GST have prompted large fleet operators to replace older vehicles with modern multiaxle trucks,” said Vinod Aggarwal, MD of VE Commercial Vehicles that makes the Volvo and Eicher tagged trucks in India. “Sales of medium and heavy duty trucks have already crossed 224,000 units in the first nine months (April-December) of the fiscal year. We should surpass the peak seen in 2011-12.” GST has made long haul multiaxle vehicles more economical, as transportation of commodities will happen from plants to the market directly, Ashok Leyland’s Kathuria said.
Demand for intermediate commercial vehicles, too, is expected to remain strong with an increase in the need for intra-city movement. Including light commercial vehicles, industry executives expect sales in the commercial vehicle sector to grow 13%, the fastest pace in seven years.
A Looking Ahead Conclave organised by the Society of Indian Automobile Manufacturers projected sales to grow 9-11% in the medium and heavy commercial vehicles segment next fiscal year starting April and 10% in construction equipment. Sales of light commercial vehicles are expected to expand 10-12% next fiscal year.
Given the demand uptick, Tata Motors is looking at measures to increase production at its MHCV manufacturing facilities in Lucknow and Jamshedpur, said Girish Wagh, its president for the commercial vehicle business unit.
The construction equipment segment is likely to hit a new peak, posting growth of 11% on the back of the ₹2.4 lakh crore investment in infrastructure projects this fiscal. Industry players expect the growth momentum to continue going ahead. In this segment, tipper sales have been growing in double digits since October 2017, boosted by the push towards infra development.