Expect M&HCV growth to pick up Q3 onwards: Tata Motors

In an interview to CNBC-TV18’s Farah Bookwala Vohra, Ravi Pisharody, ED-CV Business Unit, Tata Motors says the homegrown auto major expects medium and heavy commercial vehicle (M&HCV) growth, a lead indicator of the economy, to pick up Q3 onwards.

He says M&HCV space had started seeing decline in growth January 2012 onwards.  “We think the increase in investments in the road transport will help the commercial vehicle sector,” he told the channel.   Below is a verbatim transcript of the interview Q: What are the cues that you are picking up from this year’s Society of Indian Automobile Manufacturers (SIAM) meet? Some very strong statements have been made by ministers. A couple of comments have been picked up and in fact being tweeted. Some of the leaders are saying that there seems to be some sort of genuineness to their statements. What is the view that you are taking on this?A: Firstly, this year's SIAM meeting is being held under somewhat better circumstances than the last two years. Particularly, the last year was pretty gloomy in terms of the scenario around and at that time they seem very little that will change in the future. Whereas at this time, we are talking in September 2014, we have already seen in the last four-five months some recovery. The car industry is growing and the medium and heavy commercial, which is my business, which has gone through a very terrible time for the last two-and-a-half years, is on a low base albeit has started growing. We have Mr Gadkari speaking; he has made statements specifically particularly in the area of investments in road transport and overhauling of the motor vehicles act and a few other things, which if implemented, will definitely give a big boost to the economy as such.

There is a strong link between the auto industry and the economy. So we do expect, if all those things are carried out, and the minister went out of his way to say he is sort of is promising all that will be done within one year. So if that is the case—we know from the pulse—all this does have a pay off in the auto industry.

Q: The M&HCV portfolio has done quite well. However, we still see that the LCV portfolio is not doing well. In fact, if you go by your August numbers, it was down almost 35 percent on a year-on-year (Y-o-Y) basis. What do you think is holding back the growth in this particular segment? This is not to say that this is unique to you. This is also the case with your competitors. When do you see some sort of revival? What do you think will bring revival in this particular segment?A: M&HCV segment, which is the long distance cargo, many pundits have accepted now for many years that this is the lead indicator of the economy. This sector started falling almost from January 2012. It didn’t get noticed in that fiscal but people started talking about it two quarters down the line.Now, the light commercial vehicle (LCV) segment got impacted much later. So if you look at 2012-2013, the M&HCV did very badly. The LCV was still okay. It started declining in 2013-2014 that too after October. So you will see when you talked about the decline versus the previous year, from October last year the numbers did start coming down. So we will see that base effect kicking in Q3 and Q4. There is another important aspect for the small commercial vehicle segment, these are people who buy these vehicles as a form of income, they don’t have too much money, they depend on a finance loan and the loans they need are 90-95 percent of the vehicle because of too much vehicles less economic activity, they have not been able to pay back the loans. So the financing companies have also gone through very terrible time. So they have responded by dropping the lending rates. So today if somebody wants to buy small commercial vehicle, he is not getting more than 80 percent loan and economy is also uncertain in terms of whether we will have load to carry. So there is always a lag effect if M&HCV revival continues, as it has for the next four-five months.