After a washout in the June quarter, one of India’s largest commercial vehicle (CV) makers, Tata Motors, has started to record a pickup in demand. The uptick has been driven by greater fleet utilisation, resumption of vehicle finance by banks, firming up of freight rates and new infrastructure contracts being awarded.
Almost every segment of the CV industry — small, intermediate, light, medium and heavy — has witnessed a rise in demand starting September. The bus segment is the only one where demand remains poor, say company officials.
The passenger vehicle and two-wheeler segments had rebounded much earlier with September being the second consecutive month of positive growth in volume.
Relief for CV makers
PB Balaji, Chief Financial Officer, Tata Motors, said: “About a month or two back there were concerns around the pace of recovery of commercial vehicles. But as September ended and the way October has played out, we are very clearly seeing the commercial vehicle business also coming into the equation.”
From a 90 percent fall in the June quarter and then 40 percent in the September quarter, the fall shrank dramatically in the month of September to just 4 percent for Tata Motors. While the numbers for October are expected in the first week of November, Balaji added that the upward momentum has continued in this month.
“We can say that small commercial vehicles are back to growth. Intermediate and light commercial vehicles have started to see good momentum starting September. Medium and heavy commercial vehicles have come back to demand growth. The tipper segment has done very well thanks to mining projects, port and road projects all being cleared. Cargo is coming back too,” added Balaji.
Peers also do well
The commercial vehicle segment is often regarded as a barometer of economic activity in a country. Any green shoots in the CV segment indicate a direct pick up in the economy. And there are signs aplenty, not just at Tata Motors, but at its rivals as well.
For Chennai-based Ashok Leyland the recovery has been even better. The company recorded a 2 percent increase in volumes of medium and heavy trucks and a 20 percent rise in volumes of light commercial vehicles during the month of September.
Mumbai-based Mahindra & Mahindra arrested the fall in September, reporting 0.18 percent growth in volumes. Tata Motors, Ashok Leyland and Mahindra control more than 80 percent of the domestic CV industry.
“Financing concerns are starting to abate. We are seeing an improvement in the loan recovery rate and that is ensuring financing is coming back into the segment. I see most of the issues of commercial vehicles resolved in the next three months or so. We are cautiously optimistic that the worst is over for commercial vehicles,” added Balaji.
“Things are moving faster than we are extrapolating and therefore we have seen the fleet utilisation rate moving up, which is seen in the e-way bill, toll collection and fuel consumption. Another indicator is our non-auto business, where we have the spare parts and servicing business, which has also started to pick up,” added Balaji.