Monsoon in India set to spike commercial vehicles sales

Sales of medium and heavy commercial vehicles (M&HCV), which were doing well in FY16, may lose pace in the next three to four months due to a delayed monsoon, less agricultural output, increase in diesel prices and decreasing truck rentals.

Monsoon in India set to spike commercial vehicles sales

In first two months of the current fiscal year, the growth in the M&HCV segment has fallen to 21.49% y-o-y to 48,466 units as a result of diminishing replacement demand. In FY 16,M&HCV volumes had grown by 29.91% to 3,02,373 units when compared to 2,32,755 units in FY 15 on the back of increasing activity in the mining, infrastructure and manufacturing sector. According to the market experts, most of the demand came from the replacement of old vehicles by the fleet owners.

“Our recent channel checks across M&HCV dealers indicated that demand has witnessed some moderation in June. Dealers indicated that average volumes growth in June has been 10-15% compared to 21% in April and May,” said an automobile analyst with a institution brokerage firm.

Experts point towards the delay in the arrival of monsoon and consequent decrease in availability of freight for the expected decline in the truck and other heavy vehicle sales.

“Diesel prices have increased by 20% in the last four months while the freight rates have not increased accordingly and this is hitting our margins. Our input costs have only increased, as a result many fleet owners are not planning to add new vehicles,” said a fleet owner based in Gurgaon.

Though sale of trucks have slowed down, the total volumes in the segment increased as tippers are in demand as a result of the increasing activity in the mining sector. Tipper volumes in states like Karnataka, Goa, Jharkhand have seen sharp increase.

“Initially there may be some challenges but we will see reasonable growth in the sales of the heavy and medium vehicles in the current financial year on the back of increased spending on infrastructure from the government and increase in mining activity. Though it will be difficult to match the growth of the last fiscal year in the segment,” said Kumar Kandaswamy, Partner, Delloitte.

Source: http://goo.gl/AT3yRP