Writing on the wall: Truck sales have been falling and will continue

The collateral damage of the crippling industrial slowdown is getting more pronounced with the commercial vehicle segment getting stuck in a slow growth trough.

An articlein the_Hindu Business Line_ notes that sales of medium and heavy commercial vehicles–the main mode transportation for the industrial sectors like mining and infrastructure–have declined for the last 12 months. The only saving grace for the commercial vehicles segment has been the growth in sales of light and small models.

According to the report the declining growth rate of the mining industry and a minuscule 0.1 percent growth in the infrastructure sector in the first half this year have taken a toll on the M&HCV segment. Low freight rates, low fleet utilisation and a reluctance to replace vehicles quickly have added to the gloom.

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Change in company structures and advancement of technology have meant a fall in truck demand for transportation. Larger, more efficient trucks have become the norm and improved roads have reduced transportation time, the report said.

The fortunes of the segment are unlikely to turnaround in the near future. Only a meaningful economic revival will help the industrial sectors. This will, in turn, give a fresh lease life for the commercial vehicles segment. But this is likely to happen only in the second quarter of the next financial year, once the new government comes to power and political uncertainty ends.

ZyFin Research, an economy think tank, said yesterday in a press release that the overall industrial activity in November and December will slowdown.

“The economic recovery process appears to be losing steam quickly. It has become critical for the fiscal authorities to bring back the emphasis on controlling non-plan expenditure and concomitantly boost infrastructure spending,” Debopam Chaudhuri, Vice President of Research and Development, was quoted as saying in the press release.

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It also said consumer confidence has taken a beating and urgent steps are needed to revive this.

For the eighth month in a row, companies likeMaruti Suzuki, Tata Motors and Mahindra & Mahindra reported low M&HCV sales in November. The Society of Indian Automobile Manufactuers (SIAM) has said it doesn’t expect auto sales numbers to go up until next year’s general elections.

The SIAMdata shows that HCV sales fell 28 percent to 7,729 units in the first half yearcompared with a 19 percent decline a year ago. The MCV, meanwhile, contracted a whopping 36 percent to 2,536 units as against 15 percent.

However, according to the HBL report, auto makers are content to wait out the period and in the meantime are preparing for the next growth cycle with Mahindra, Tata and Ashok Leyland getting ready to launch new or modified models.