Truck sales drop as industrial activity slows down in India

Truck sales in India dropped for the fourth straight month on account of the slowdown in the country’s economy and industrial activity. Consequently, heavy vehicle manufacturers have also slashed production in the face of piling inventory with their dealers.

With the entire auto industry facing a crunch, the M&HCV (Medium and Heavy Commercial Vehicles) segment has been particularly hit, with sales down by 17.5% to 71,456 units in July. 

India’s largest commercial vehicle manufacturer Tata Motors saw a decline of 23% in M&HCV sales for the first quarter (April – June 2012) of the current fiscal. Ashok Leyland also recorded a 12.5% fall for the same time period. 

A number of factors have contributed to the downfall in M&HCV sales. India’s economic growth for April-June 2012 is expected to fall below 5%. The national industrial production also contracted to 1.8% for June. Goods movement from agriculture to manufacturing to export-import are on the decline as well, affecting the transportation industry.

The uncertainty has made fleet owners and transport companies unwilling to invest in newer fleets to replace older ones. This despite dealers offering discounts of up to Rs 3.5 lakh and schemes with low interest rates. They also fear for loan delinquency and repossession of their fleets if the freight market does not improve soon. During the 2008 economic slump, more than 50,000 trucks were reportedly repossessed for non-payment of loans.

On the upside, the Light Commercial Vehicles (LCV) segment continues to be one of the fastest growing segments in the country. Tata Motors and Ashok Leyland posted healthy growth in LCVs for the first quarter of this fiscal. As consumer goods movement is expected to grow in the urban areas, the sales of LCVs are expected to post double-digit growth in the current fiscal.