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Last Updated : Jun 30, 2016 03:39 PM IST | Source: CNBC-TV18

5-tonners to keep growing at 25%, says Eicher Motors

Speaking to CNBC-TV18 Vinod Aggarwal of Eicher Motors said tippers are doing brisk business for the company. He added that as domestic consumption increases, thanks to the Seventh Pay Commission hikes, it will help the commercial vehicle (CV) sector.

Speaking to CNBC-TV18 Vinod Aggarwal of Eicher Motors said tippers are doing brisk business for the company. He added that as domestic consumption increases, thanks to the Seventh Pay Commission hikes, it will help the commercial vehicle (CV) sector.  

He is looking at good growth in the CV fleet. In the first two months of this calendar year, 5-tonners were growing 25 percent and he expects to keep the same growth rate going forward.

Although discounting has been high in the business, he said going forward it will be down as the company will see better pricing. Discounting had crimped company's margins by 8.5 percent in the quarter gone by. 

The growth in trucks sales has been around 40-50 percent in three months, but there has been a slowdown in coal mining, he said. 


He is hopeful of retaining market share.

Views also came forth from Kevin D'sa, president-finance at Bajaj Auto. He said that impact on payhikes on the sector is going to be positive. The four-wheeler market will gain, he said.

With pay disbursements happening in August and September, he said it is going to be positive for FMCG, auto and consumer durables. "The festive season will be a bumper season."

Below is the transcript of Vinod Aggarwal and Kevin D’sa’s interview with Sonia Shenoy and Anuj Singhal on CNBC-TV18.

Sonia: More money in the hands of government employees does not mean more trucks getting bought, but nevertheless, the sentiment would improve. Tell us how much have you seen in terms of a demand pick up. We were speaking with Ashok Leyland yesterday and Mr Dasari did indicate that the tipper segment is seeing a big bump up because of the infrastructure pick up. What are you noticing?

Aggarwal: That is absolutely correct. Tipper is growing very well, but on the other hand, whenever the domestic consumption increases, it helps the commercial vehicles (CV) sector indirectly because they have to move more goods and more items. So definitely, Seventh Pay Commission will add positivity to the entire economy and we expect better demand based on more spending in the economy.

Anuj: What kind of run rate do you think you can maintain? It has been really strong for the last couple of months, but going forward, what kind of ballpark numbers can you give us in terms of growth rate?

Aggarwal: These two-three months for the CV sector per se, because of monsoon, the demand is slightly subdued. Other than that, we are looking at good growth coming in the CV sector. If you look at the first two months of this financial year, the CV sector, the five tonne and above is growing by 25 percent. So, we are expecting this growth will get further boost with Seventh Pay Commission.

Sonia: The only niggling worry in the CV space is that the discounting levels continue to remain quite high and that is really restricting margin growth. So, for your own company, you have done about 8.5 percent margins in the quarter gone by. Have discounting levels come down by any chance or do you think that will continue to put pressure?

Aggarwal: They are coming down, I would say, because as the demand picks up, the capacity utilisations improve. So, over a period of time, we expect these discounting levels have to go, because these are not sustainable. So, hopefully, we should see better pricing.

Anuj: What about your market share? You have gained market share over the last three-four months, do you think that is going to continue?

Aggarwal: That is what we are aiming at. We are trying to consistently and steadily improve on the market share.

Sonia: What kind of an impact can the pay hikes have for the sector as a whole?

D’sa: I think it's extremely positive for the industry, for the two-wheelers as well as for the four-wheelers. Unlike the past where we had huge growth of the two-wheeler, I think this benefit will go more to the four-wheelers keeping in mind the fact that the penetration is already relatively high for the two-wheelers. But yes, it's going to be extremely positive for the fast moving consumer goods (FMCG) goods or consumer durables and for the auto sector. However, what I see is with the disbursements likely to happen more in August-September, this time the festive season is going to be a bumper season for all.

Anuj: Of course the overall impact is going to be staggered, not coming in full force on July 1 as part of August series. So, do you think the sleep through is going to be slow?

D’sa: They have also mentioned about the arrears that are going to come in a staggered manner and therefore I was saying that sometime in September-October because that is when the festive season starts and there will be some increase in the net take home pay of the employees which will go into these consumables.

Sonia: The two-wheeler sector is expecting the festive season to be a bumper one, what about the CV space? What kind of growth rates are you looking at now over the next four-six months?

Aggarwal: As I mentioned, we are going through good growth period and we are expecting this growth to continue based on infrastructure spending. And I hope that with this increase in expenditure in government side, due to this salary hikes, it should not impact the planned expenditure. So that is what I am expecting government will manage its finances very well and if it continues the infrastructure spending, the growth should continue.

Sonia: If you can just quantify that for us, how much have the construction trucks growth been in the last two-three months and how munch have you seen in terms of a pickup in both mining and road construction?

Aggarwal: The trucks growth in the infrastructure sector has been around 40-50 percent in the last three months. However, in coal mining it is a slowed down because we have seen some piling up of coal stocks at the mines, but other than that, on the road construction side, there has been good development.

Sonia: You said four-wheelers should benefit more, that is purely a function of penetration of two-wheelers being higher, right?

D’sa: I would believe so because if you see that today a person who is getting about a salary of Rs 25,000 a month would by and large have a two-wheeler. So what I see happening is, people going and upgrading their existing vehicles in the two-wheeler segment, automatically of course, expanding the segment, but the penetration of four-wheelers and the aspiration of a lot of government employees would definitely be going to buy a car and this would go to a large way in meeting those dreams.

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First Published on Jun 30, 2016 09:40 am
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