An employee writes on a register inside the Tata Motors car showroom in Ahmedabad
Tata Motors is betting on higher demand for tippers to offset lower demand for cargo vehicles and expects commercial vehicles sales to grow 10-15 per cent in FY17 despite falling sales in last three months.
Tippers are vehicles used in sectors like construction, mining and infrastructure, and account for a third of medium and heavy commercial vehicles (M&HCV) sales for Tata Motors.
"Tipper vehicles are expected to grow further, given that the economy will improve with increasing construction, infrastructure and irrigation activities," said Ravi Pisharody, executive director, commercial vehicles Tata Motors in an email interaction with Business Standard.
In Q1 FY16-17, growth in cargo vehicles was slightly lower, which was offset by growth in tippers. "If you look at H1 FY15-16, M&HCV growth was mainly driven by cargo vehicles, while growth from construction tippers came during the second half of the year," said Pisharody.
"Besides construction, we need to see stronger numbers in manufacturing and mining, to witness an improvement in long distance goods and material movement, which will create further requirement for cargo vehicles and last mile transport," he said.
Sales of medium and heavy commercial vehicles (M&HCVs), a key indicator of economic recovery, have been falling in the last few months. The sales of M&HCVs declined by more than 10 per cent in August and 7 per cent in July.
Tata Motors reported a 17 per cent drop in sales of M&HCVs in August after a drop of 13 per cent in July. Ashok Leyland sales fell by 5 per cent each in August and July.
Why are commercial vehicles sales falling after growing 20-21 per cent for 22 months till March 2016?
"After two strong years of growth, it was expected that growth rates this year would ease off. The base of 2015-16 industry sales is almost as high as previous year peak of FY11-12. Growth is expected to be in the region of 10-15 per cent for FY16-17," said Pisharody.
"In the monsoon months of July-Aug, demand slows down usually. So we need to watch a couple of months, particularly September/October, before anticipating any longer term trend. There's a slowdown in replacement demand, freight availability while freight rates have been flat," he said.
CV sales rose last year as drop in fuel prices made operations viable, interest rates come down slightly, and industry was at the bottom of the replacement cycles transporters had postponed purchases in view of the drop in resale prices and there's some anticipation of growth, said Vineet Agarwal, managing director, Transport Corporation of India.
It was also driven by regulatory changes as truck operators made big buying (60,000-80,000 vehicles) in September 2015 quarter ahead of the implementation of anti-brake locking system.
In Q1 FY16-17, growth in cargo vehicles was slightly lower, which was offset by growth in tippers
Tipper vehicles are expected to grow further, given that the economy will improve with increasing construction, infrastructure and irrigation activities