Commercial vehicle sales remain a drag, drop by 18% in Nov

Domestic commercial vehicle sales dropped by 18% in November 2019. The sales has declined from 67,374 units to 55,473 units.The demand has reduced due to the slow pace of industrial activity, extended rain delaying infrastructure projects, higher operating cost and other factors.Domestic commercial vehicle sales of Tata motors has dropped by 17 % compared to last year.Domestic truck sales dropped by 55% to 3,447 units from 7,627 units. While the sales of domestic bus increased by 196% from 633 units to 1,874 units.Mahindra & Mahindra reported a 12% decline in domestic commercial vehicle sales.

Girish Wagh, president, commercial vehicle business unit Tata motors, said, " As we move closer towards BS-6 transition, focus continues to be gradual stock reduction, with retail sales in November being higher than wholesale by over 10%". He added M&HCV sales grew by 236% over the previous month, as enquiries continued to rise gradually, with fleet owners realising the economic benefits of replacement of their older vehicles. With overall system stocks at a multi quarter low, and increasing enquiries for replacement demand, the company sees volumes and realisations firming up over the next few months. Over the past four to five months Tata motors commercial vehicle inventory has been cut by around 29,000 units.

VE commercial vehicles a subsidiary of Eisher motors has reported a decline of 21.4 per cent in domestic commercial vehicle sales. The sales has declined from 3,935 units to 3,092 units compared to the last year.

The sales of Ashok Leyland's domestic M&HCV and light commercial vehicle sales declined by 25 per cent to 9,377 units during November from 12,570 units a year ago.

The reduction in production/volume resulted in high pressure on profitability, said Motilal Oswal Institutional Equities.

"We do believe that the worst of the commercial vehicle cycle is behind(barring any disruption during BS-6 transition), but a sustained recovery in volumes would be gradual," said an update from the research analyst firm.

Dheeraj Hinduja the chairman of Ashok Leyland said that improvement of the finance sectors one of the factor that could bring growth back to the industry.

Hinduja in an interview told that it is not a luxury product and GST reduction will be good fo the industry.

The decline in sales affects the major commercial vehicle manufacturing companies.

The companies are expecting a recovery in the second half of the fiscal year.