Swaraj Baggonkar Moneycontrol News
The new axle load norms approved by the government in the middle of last year has proved to be one of the main reasons behind the poor performance of commercial vehicles during the past few months.
Sales of medium and heavy commercial vehicles (MHCV), especially in the cargo segment, saw a 22 percent fall for India’s top four truck and bus manufacturers: Tata Motors, Ashok Leyland, VE Commercial Vehicles (VECV) and Mahindra & Mahindra (M&M).
Sales of MHCV during November and December slumped to 51,702 units as against 66,357 units posted in the same period last year, as per data supplied by the Society of Indian Automobile Manufacturers (SIAM).
In July last year, the government had increased the permissible gross vehicle weight (GVW) of over 16 tonne heavy trucks by about 12-25 percent.
The norms allows truck owners to increase load on the vehicle up to the new limit as prescribed by the government. The higher limit has in a way legalised overloading and given fleet owners the opportunity to sweat their existing assets more instead of purchasing new trucks.
This is one of the major reasons why there has been sluggishness in demand for new trucks, besides other issues such as tightened credit lending norms, increased interest rates, liquidity issues with non-banking finance companies (NBFCs) and higher diesel prices.
Girish Wagh, President (CVBU), Tata Motors, said, “The axle load increase did lead to some demand uncertainties as existing vehicles were allowed to register for higher load. This created a doubt in the minds of fleet owners whether there was need to add fresh vehicles or sweat the existing lot. The end consumer, who have higher bargaining power, began to demand the benefit of increased axle load. As a result of all this, sentiment started to dip.”
MHCV sales of Tata Motors fell 26 percent during the last two months to 21,299 units.
On the other hand, sales of trucks in the sub-16 tonne segment, which comprises intermediate and light commercial vehicles, didn't suffer a similar fall in numbers.
Tippers, where overloading is not possible, continued to post double-digit growth during the same period.
“Every segment has its own way of responding to the situation. There was a directive given to the RTO (Regional Transport Office) that older vehicles can also be certified for the new load. Then a 37 tonne vehicle can be certified to carry 42 tonne. There was no need for truck owners to invest in new trucks if existing trucks can carry that extra load,” said a senior executive of Ashok Leyland.
The Chennai-based company reported a 25 percent fall in MHCV sales to 20,013 units during November and December. Ashok Leyland is the second biggest manufacturer of MHCVs in India.
The Eicher-Volvo joint venture company - VE Commercial Vehicles, and Mahindra & Mahindra, the smallest player in the MHCV segment, also reported a contraction in demand during the reporting two months.
Companies were thus forced to go back to the drawing board to make suitable engineering changes to their products that will help them qualify for certification under the new load norms.
“The new vehicles we have engineered are meant for increased axle norms and are going to be better than current ones. If the current range is going to do X tonne payload, the new range is going to offer better cost of ownership. Replacement demand will thus be better,” Wagh added.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
