Feb 27, 2013, 10.58 AM IST | Source: CNBC-TV18

Budget 2013: Commercial vehicle biz awaits policy fuel for growth race

The commercial vehicle (CV) industry has been struggling this past year. There was some relief when the government stated that its primary aim is to boost growth. However companies are bracing for a bumpy ride this coming year as well, reports CNBC-TV18's Swathi Narayanan.

The commercial vehicle (CV) industry has been struggling for the past year. There was some relief when the government stated that its primary aim was to boost growth. However companies are bracing for a bumpy ride the coming year as well, reports CNBC-TV18's Swathi Narayanan.

India's commercial vehicle industry is in reverse gear, having reported a year-on-year contraction of 0.37 percent in the nine months from April 2012 to January 2013.

There was some relief from the light commercial vehicle space, which grew 15.48 percent over the period, but for medium and heavy commercial vehicles, sales dropped 21.37 percent. The next three quarters don't look too bright either.

Philippe Divry, managing director, Volvo India, said, "There are cycles in the CV industry and we know cycles last for 12-30 months depending on the economy. I would say that either at the end of the year or after the elections next year, something is bound to happen."

Kapil Arora, partner, automotive practice, E&Y, said, "The slowdown in economic growth, the sluggishness as far as infrastructure is concerned, the role of government in spurring some of these projects has been at the heart of why the segment has seen a slowdown. Unless those factors improve the next three quarters will be challenging."

The industry is learning to live with high fuel prices and rising interest rates but they hope that the upcoming Budget will open up a few growth avenues, for both the economy and the sector. Particpants say a clear roadmap for the implementation of critical tax reforms like Goods and Services tax (GST) will also help - one that the government will not be forced to change frequently.

Marc Llistosella, chief executive officer and managing director, Daimler India Commercial Vehicles, said, "You cannot change direction every third or fourth month. You must have a clear direction. When is the GST coming? On what day can we plan with that?"

However, for the moment, industry does not seem very optimistic. The overarching feeling is that the road to recovery will be very long and unless the government does its bit to improve infrastructure and strive to implement forward-looking policies, the sector's growth engine will continue to run on empty.

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