ICRA RESEARCH: COMMERCIAL VEHICLES VOLUMES WILL HAVE NEGATIVE GROWTH OF 10-12% IN FY 2020
By D yadav
Date: Oct 08 , 2019
New Delhi: As per the ICRA’s data released in September the India’s domestic Commercial Vehicle demand will register negative growth.
Customers are limiting their pre-buying decision ahead of the roll-out of BS-VI emission norms.
The commercial vehicle industry is likely to degrow by 10-12 per cent during financial year 2019-2020, according to the corporate rating agency, ICRA.
Slowing economic growth and subdued infrastructure activity have restricted the freight availability; However, change is axle-load norms from July 2018, GST and E-way bill implementation have improved turnaround time of the running vehicle on the road this created a over-capacity situation in the sector.
In the second half of FY 2019, the domestic commercial vehicle industry started facing the slowdown, now it has reached to a newer height during the current fiscal, with registering the sharp 19 per cent degrowth in volume during YTD FY2020 (April-August 2019) on a YoY basis.
In July-August period the Commercial Vehicles players reduced their wholesale dispatched by 33% to reduce the inventory levels at dealerships, because of less footfalls and retail sales.
ICRA pointed out that the slowdown has been particularly sharp in the M& HCV (Truck) segment, wherein volumes contracted by 32 per cent during YTD FY2020.
According to Shamsher Dewan, Vice President, ICRA Ratings, “The M&HCV (Truck) segment has been impacted by the double-whammy of excess capacity along with subdued freight availability, which has suppressed freight rates and kept profitability of fleet operators under pressure. Coupled with tight liquidity in the NBFC space, and expectations of a GST rate cut, fleet operators had deferred their vehicle purchases in the current scenario.”
Mr. Dewan further added “Given the high inventory levels at dealerships and subdued retail sales, OEMs are focusing on rationalizing the inventory in the system prior to the roll-out of new emission norms, which would render unsold inventory of existing BS-IV vehicles as obsolete. Hence, wholesales dispatches are not expected to increase materially over the latter half of the fiscal,”.