Even as commercial vehicle (CV) sales of leading original equipment manufacturers (OEMs) witnessed an uptick last month, industry experts said that volumes may fail to grow in the upcoming fourth quarter as India gets into election mode due to which pace of award of contracts in the infrastructure sector is expected to slow down, thereby dampening the demand for CVs.
In December 2023, nearly 32,721 units of medium and heavy commercial vehicles (M&HCVs) were sold by the top 3 CV makers such as Tata Motors, Ashok Leyland and VE Commercial Vehicles, which is 1.70 percent more than 32,173 units in the same month last year.
The overall sales of trucks and buses were down to 73,347 units, compared to 76,817 units for the same period last year (across the top 4 CV makers). Industry observers say the numbers went down due to the high-base effect of small commercial vehicles (SCV), which were booming due to the recurrent demand by e-commerce and food aggregators.
OEM sales in December
Tata Motors revealed that its total CV sales went up by one percent to 34,180 units in December 2023 as compared to 33,949 units in the year-ago period. The automaker’s domestic sales of MH&ICVs were 16,851 units vis-a-vis 15,244 units in Dec 2022; In Q3 FY24 it was 44,365 units, compared to 40,391 units in Q3 FY23.
Girish Wagh, Executive Director, Tata Motors Ltd. revealed that Tata Motors commercial vehicles registered domestic sales of 91,735 in the third quarter of FY24, which is marginally higher than the third quarter of FY23 sales of 91,704. He also revealed that the M&HCV segment grew ~14 percent vs the third quarter of FY23, with demand coming from the government’s infrastructure initiatives, expansion in core industries and sustained growth in e-commerce.
“The YoY growth trend witnessed during past quarters paused in the third quarter of FY24 on account of the higher base effect, impact of elections held across five states, and the post-festive seasonal slowdown in rural consumption,” he said.
VE Commercial Vehicles Ltd. (A Volvo Group and Eicher Motors joint venture) recorded sales of 8,026 units in December 2023 compared to 7,221 units in December 2022, recording a growth of 11.1 percent.
The Eicher brand recorded sales of 7,789 units. Of this, 7,468 units were sold in the domestic market, 11.9 percent up from 6,671 units in December 2022.
Volvo Trucks and Buses recorded sales of 237 units in December 2023 as compared to 218 units in December 2022, up 8.7 percent.
However, commercial vehicle maker Ashok Leyland reported a 10 per cent decline in total sales at 16,324 units in December 2023 compared to 18,138 units in the year-ago period. Its domestic sales were also down 10 per cent at 15,323 units as against 17,112 units in December 2022. Its sales of medium and heavy commercial vehicles in the domestic market were at 10,102 units as against 11,399 units in the year-ago month, down 11 per cent.
Gloomy Outlook in Q4 FY'24
As per ICRA, the total number of commercial vehicles sold during the first nine months stands at 6,64,975 units (April-December 2023), up by 2.8 percent from 6,46,938 units in the same period last year. It expects the domestic CV industry volumes to grow by 2-4 percent in FY2024, supported by a healthy allocation for capital spending in the Union Budget 2023-24 which supports infrastructure development in segments such as roads, metros and railways.
However, the ratings agency says that the demand for CVs slowed down in November and December 2023, post the strong festive sales.
“The volumes are expected to remain subdued in the fourth quarter, FY2024 on a YoY basis, driven by the pause in infrastructure activities as the model code of conduct kicks in the fourth quarter of FY2024, as also the high base of fourth quarter of FY2023 due to pre-buying before the implementation of BS VI 2.0 emission norms,” said Kinjal Shah, Vice President and Co-Group Head - Corporate Ratings, ICRA Limited.
V G Ramakrishnan, Managing Partner, Avanteum Advisors LLP, states that there has been a significant uptick in government spending on infrastructure and the increased pace of execution is driving demand for cvs. However, he says, “Investments in the last few years have been front-ended, reflecting in higher GDP growth in the first and second quarters. Truck sales closely mirror GDP growth and the sales are reflecting this trend.”
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