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Last Updated : Nov 26, 2019 09:37 AM IST | Source: Moneycontrol.com

It could take 5 years for CVs to rescale the peak, says Tata Motors' Girish Wagh

In the past one year, monthly volumes have dropped by half for several players and factories are operating at just 25 percent of their full capacity

 
 
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As a free fall in demand forces truck and bus makers to undertake unscheduled production holidays and with hopes of a revival remaining uncertain, India’s top commercial vehicle player has predicted a five-year period for the industry to regain its peak levels.

A combination of factors have led to a significant demand contraction for commercial vehicles (CV) since the past one year, with monthly volumes dropping by half for several players and factories operating at just 25 percent of their full capacity.

Girish Wagh, President (Commercial Vehicle Business Unit), Tata Motors, said, “A period of trough usually lasts for 24-30 months. There have been some troughs, which have lasted for 12 month. The current trough is into its 13th month. Also, it can take two-to-five years to rescale the earlier peak. We had reached the peak in FY13 and rescaled that peak in FY18.”

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Wagh was addressing an audience comprising auto component makers who had participated in the two-day ACMA Technology Summit and Awards 2019 in Pune.

As per data shared by the Society of Indian Automobile Manufacturers (SIAM), wholesale sales of medium and heavy (M&HCV) trucks and buses during April-October slumped 50 percent to 15,334 units. The entire CV segment was down 23 percent to 66,773 units during the same period.

“We all thought that we will have a slowdown next year (2020) because of cost increase and pre-buying ahead of the kicking in of Bharat Stage-VI regulations. But the current slowdown is not just because of cyclical factors but non-cyclical factors as well. Core infrastructure consumption and rural demand are both down,” Wagh explained.

Tata Motors is India’s largest commercial vehicle player. The impact of the slowdown was felt the most on this Mumbai-based manufacturer. Its M&HCV volumes have crashed 48 percent to 47,224 units during April-October, including a 63 percent freefall in volumes during October itself.

Chennai-based Ashok Leyland, the country’s third largest CV maker, reported a 38 percent drop in volumes to 44,534 units during April-October. The Hinduja Group flagship had to shut production from half a month in September and October.

Regulatory changes, cost inflation, unavailability of finance and change in laws for load carrying trucks severely dented demand, Wagh said.

“The regulatory changes in the past 30 months have led to humongous cost increases. Add to that, commodity inflation was the highest last year. It made operating economics unviable. Because of the NBFC issue, liquidity got sucked out of the system. The increased axle load regulations were introduced with retrospective effect. Therefore, all vehicles on the road were allowed to carry 15-20 percent more load. This created huge supply for cargo at a time when demand was slowing down,” Wagh stated.

During previous downturns, at least a one or two segments defied the fall and continued to grow. For instance, when heavy truck sales were down, small trucks were still growing. However, the current slowdown has seen each of the segments slipping into the red.

“All segments have gone into a slowdown simultaneously. This has never happened before. The duration of the slowdown is also much longer,” he added.

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First Published on Nov 26, 2019 09:37 am
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