Sales of medium, heavy-duty trucks pick up pace in June

Mumbai: After declining for 33 consecutive months, sales of medium and heavy-duty trucks picked up in June, as an improvement in the mining sector and a pick-up in manufacturing led to some revival in demand for commercial vehicles.

With the exception of Tata Motors Ltd, the market leader in the commercial vehicles, sales at most firms, including Ashok Leyland Ltd, Eicher Motors Ltd, Volvo Eicher Commercial Vehicles Ltd and Mahindra Trucks and Buses Ltd, saw a spike.

The sales of such vehicles, which include tippers and tractor trailers that are deployed for construction, mining and haulage, are often closely linked to economic activity. Weak growth in the economy along with legal hurdles faced by sectors such as mining had led to a sharp decline in commercial vehicle sales over the last couple of years. Commercial vehicle sales declined to 180,000 units in fiscal 2014 from 345,000 units in fiscal 2012, according to the Society of Indian Automobile Manufacturers. The decline for heavy-duty trucks, which almost halved during this period, was steeper.

Ashok Leyland, India’s second largest truck maker by sales, reported sales of 5,542 units of medium and heavy commercial vehicles, up 17.6% a year ago.

Eicher Motors, the third largest in the pecking order, also saw sales of heavy duty trucks go up 70.3% to 758 units. Sales at the company’s joint venture firm Volvo Eicher Commercial Vehicles also went up 27% to 4,242 units in June over a year ago, according to Vinod Aggarwal, managing director at the firm. Aggarwal attributed the pick-up to the positive sentiment that has been fuelled by the government’s plans to restart stalled road projects. “We expect demand for tippers, that have been under pressure, to go up with this,” he said.

According to S.P. Singh, a senior fellow at the Indian Foundation of Transport Research and Training, much of the surge in sales has been led by replacement demand and not demand for new vehicles. Singh added that first time buyers are yet to return to the market. He, however, acknowledged that there are early signs of a pick-up as seen in the firming of freight rates over the last one month.

Sales at Tata Motors, which commands a 60% market share in medium and heavy-duty trucks, however, remained tepid, dropping 13% to 9,620 units. In an email response, the company’s spokesperson said: “Tata Motors has increasingly moved towards a more restrained approach towards discounting while the competition continues to discount as much as 30-50% more and this may have some short-term, limited gains for those companies.”

Meanwhile, Mahindra Trucks and Buses, one of the newer entrants in the space, too, saw volumes for such vehicles increase to 284 units in June compared to 137 units a year ago. “Sales have also been spurred by demand for newer, younger vehicles in their fleet by transport and logistics firms,” said Nalin Mehta, managing director at Mahindra Trucks and Buses.

Bhuj-based AMW Trucks Ltd saw flat sales, with 360 units sold in June compared with declining sales in the previous months. The real demand, according to A. Ramasubramanian, president at AMW Motors Ltd, will start showing following the Union budget and the monsoon, which typically slows mining and construction activities. “While what we are seeing now is positive, an expansion in excess of 10% is expected only by the end of second quarter,” he said.

Truck makers and experts, however, remain cautious. While the government is trying to clear a number of stalled projects in sectors such as roads, some of the measures are still to take shape.

“The next three-four months will be critical,” said Deep Mukherjee, senior director at India Ratings and Research.