Govt's cut in spending to impact HCV manufactures

Ronojoy Banerjee - Reporter, CNBC-TV18.

At the backdrop of the worst year for the heavy commercial vehicle (HCV) segment in the recent past companies from Tata Motors to Ashok Leyland have had to cut operating capacity and in some cases bring down the number of working days in a week as well.

With interest rates at an all time high and no indication of the mining ban being lifted just yet, what options do the commercial vehicle makers have? Will FY14 bring some relief to them? CNBC-TV18's Ronojoy Banerjee reports

Car manfacturers can look at the bleeding commercial vehicle (CV) segment to console themselves about the sales decline. So far this fiscal sales of the bigger trucks and buses that range anywhere between 7 tonnes and 40 tonnes and above, have declined over 20% to a little over 2-lakh units. The move has prompted manufacturers across the board to cut production and give heavy discounts to lure customers back.

Ashok Leyland, the country's second largest commercial vehicle maker is bracing itself for expenditure cuts that the FM is planning and is hoping to finish the year with flat sales at best.

Rajive Sharia, ed-marketing, Ashok Leyland said, "We are probably operating at about 70% capacity and we have run 5-days working week over the last few months. Government is one of our biggest clients. So any cut back in government expenditure will hurt us."

After posting its worst quarterly numbers in 15 months the country's largest commercial vehicle maker Tata Motors is keeping its eye out on the Budget for some relief. Though it maintains that its market share in the commercial vehicle segment is still at around 41% as it was last year

Moreover, Habib Saleh, business head-CV sales, Tata Motors said, “Budget will be very crucial this time and hoping that government will announce an incentive package. We don't see sentiments to turnaround in the segment immediately but gradually”

Whereas, industry body SIAM is lobbying government for help. S Sandilya, president, SIAM said "We are not seeking big concessions from the government. We need more investments in roads; infrastructure etc”

High interest rates, an overall economic slowdown and the mining ban in states like Karnataka and Goa are just some of the roadblocks that the CV industry is up against. The road ahead continues to look uncertain and industry is hoping for the economy to pick up before it starts to recover.