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Mini truck demand revival gains momentum

Light commercial vehicles (LCV) are finally coming out of the woods as January marked growth for the fourth consecutive month after consistently reporting declines for three years in a row.

Buoyed by new launches, replacement demand, high discounts and steady fuel prices LCV buyers are steadily coming back to showrooms as per data shared by the Society of Indian Automobile Manufacturers (SIAM).

As per the data domestic sales of LCVs, which are defined as vehicles having weight not more than 7.5 tonne, grew at an average of 5 per cent in the last four months as against a fall of 7.4 per cent during the previous six months of April-September.

Fresh on the back of new launches Mahindra & Mahindra, the LCV market leader, was the biggest gainer of the demand revival. In January the Mumbai-based company reported a jump of 10 per cent in sales for load-carrying mini trucks.

This was followed by a 9 per cent increase in sales by Tata Motors, the country's largest commercial vehicle maker, during the same month.

While M&M launched Supro Van and Supro Maxitruck in October Tata Motors launched the Ace Mega a 2.1 tonne mini truck in August.

"LCVs as a segment has been witnessing a slow but steady buildup on volumes market especially in the northern part of India. This growth has come after many months and is a result of the economic recovery, improving viability owing to decline in diesel prices and the replacement demand. If sustained, we can see growth return to the segment, albeit on a low base", said a Tata Motors spokesperson.

Analysts believe that demand for LCVs has gone through the worst and indications are rife about an uptick from here on.

"Demand for LCVs is on account of both industrial demand and non-discretionary consumer demand for the transportation of food items, as well as for transportation applications such as rural taxis. Considering the weakened demand for industry related freight in FY16, the sales volumes were largely driven by non-discretionary consumer demand," India Ratings said.

Further, the entry of truck aggregators most of whom are start-ups like Grofers, The Porter, Turant Delivery and also a Mahindra-backed venture SmartShift will likely power fresh demand for light trucks as existing assets get utilised more effectively.

Demand for pick ups in India is gathering pace and existing players are fighting for a piece of the pie. As Japanese player Isuzu launched its pick-up range in India Tata Motors and M&M are set to rev up their presence in this segment too. The pick-ups are LCVs, which have better load carrying capacity, better styling and come with better engine power.

However, financing remains an area of concern. "Interest regimes have affected the purchasing decision of first time buyers. While delinquencies are moderating, it is still higher than the comfort level for most financiers and this reflects in the fact that lending is still under 90 per cent. In the coming fiscal, we hope to these ease out," added the Tata Motors spokeperson.