NEW DELHI : Commercial vehicle sales are set to improve from August as fleet operators are likely to finalize purchases during the holiday season, industry executives said.
Fleet operators were delaying replacing or adding to their existing fleet due to high fuel and raw material prices, but now the effect of stabilizing raw material prices, especially steel, is expected to stop the rise in commercial vehicle prices in the second quarter of this fiscal year, stimulate demand for vehicles, they added.
Commercial vehicle sales of 225,000 units for the June quarter (Q1FY23) were slightly below the peak volume of 230,000 units seen in the June quarter of FY19, but the recovery in the medium and (M&HCV) was slower at 76,000 units from 89,000 units in the corresponding quarter of fiscal 2019, according to industry body, the Society of Indian Automobile Manufacturers (SIAM).
“Commercial vehicle registrations have seen negative growth of 4-5% from 2019 levels over the past several months. We expect August to remain at similar levels. Customer interest is strong, but the conversion rate is low and we expect it to improve within the next month or two as fleet operators make a decision.We expect growth from the festive months of September to October. But fleet operators are in a positive mood and are coming to ask for information,” said Vinkesh Gulati, president of the Federation of Automobile Dealers Associations (FADA).
“Growth estimates for M&HCV are above 15% for this fiscal year. On the ground too, we are seeing strong traction across all of our product lines. We are optimistic that demand for this segment will continue in the coming quarters. Some obstacles lie ahead in the form of inflationary pressures and interest charges. But India seems to be making quite good progress on the expected GDP growth of 6.5 to 7%. With these types of growth rates, we should see a strong and continued recurrence of M&HCV demand in the first quarter,” said Dheeraj Hinduja, Executive Chairman of Ashok Leyland. “We will see the benefits of lower commodity prices in the second quarter. .”
Steel prices, according to Ashok Leyland CFO Gopal Mahadevan, were even higher in Q1FY23 than in Q4FY22. The CV maker, like its peers, has taken a series of price hikes to pass on rising raw material costs to customers.
“We are also seeing a strong recovery in the bus segment as the covid-19 scenario recedes. We expect most schools, colleges, institutions, offices, intercity and long distance transport to open, this which will further contribute to volume growth,” added Mahadevan.
The bus segment of rival Tata Motors also saw a strong recovery, seeing 60% growth from March quarter volumes due to school reopenings and bus replacements. “Commercial vehicle sales are poised to grow on the back of increased infrastructure activity, demand for last-mile mobility and a strong recovery in the bus segment due to growing transport demand public. The supply situation continues to improve. We are cautiously optimistic about demand, but are closely watching carrier interest rates and profitability,” Tata Motors said.
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