TRUCK SALES TOTTER - AUTO SECTOR NOT YET OUT OF THE WOODS

By Ruma Dubey

The IIP numbers for July might have been a downer but if one looks at these numbers as a byproduct of the past, and looking ahead, especially at the auto sector, a promise of growth could become a reality.

For the past five years or so, we have become habituated to an air of ‘cautious optimism’ which later turned into wry cynicism and pessimism. Thus for all of us, to change this mind set, to be able to see signs of growth, will take some time. Man is a creature of habits so break this ‘downer’ habit into that of ‘upper’ will take a while.

The first shoots of sustainable growth are always seen in the automobile sector. It is said that automobiles, especially commercial vehicles (CVs) are the wheels of an economy – the moment they pick up speed, it’s an indication that the economy is on the way to recovery.  That’s why, despite the rise in August auto sales, one needs to wait and watch, see a growth in CV sales to say with conviction that green shoots have indeed sprouted.

Gratifying growth numbers came in from the automobile sector for August 2014. The industry produced a total 1,943,134 vehicles including passenger vehicles, commercial vehicles, three wheelers and two wheelers in August 2014 as against1,691,699 in August 2013, registering a growth of 15% (YoY). But this growth was led by passenger vehicles, especially two-wheelers. The sales of Passenger Vehicles grew by 4.46% (YoY) in April-August’14 while three-wheeler sales grew 15% where scooters led the herd at 30% rise in sales. Growth was also seen in three-wheeler segment, where sales grew 17%.

But the CV sales continued to show a degrowth. Overall Commercial Vehicles segment registered a de-growth of (-) 14% in April-August 2014 where Medium & Heavy CVs registered negative growth at (-) 5% and Light CVs dropped 18%.

A breakup of these numbers, in terms of companies, show that trouble has not yet dissipated but there is slight improvement. Tata Motors, the largest commercial vehicle maker in India, for August’14 reported a decline of 18% over 49,611 vehicles sold in August’13. Cumulative sales (including exports) for the company for the fiscal are 190,476 nos., lower by 25% over 254,355 nos., sold last year. On the other hand, Ashok Leyland did well in August’14 with a YoY 17% jump in sales growth while MoM sales rose 6%. Light commercial vehicles sales rose 14% while that of Medium and Heavy commercial vehicle sales grew 18%. Together, Tata Motors and Ashok Leyland control the HCV segment with a combined market share of 90%. And when some of the biggest in the sector show mixed growth, surely its not yet time to get optimistic.

Trucks are truly the mirror of the economy. When demand booms, goods are needed which means supply and that in turn means, trucks are needed to fulfill the demand and supply. For demand to pick up, people should first have the right sentiments and then the money in the pocket. Sometimes, money is there buts moods are wary and there is also a situation where, moods are upbeat but pockets are not so full or empty. And demand for maximum trucks comes from rural India, where goods/ farm produce is transported across the country. For India Inc and for trucks, demand needs to get buoyed and that will happen when there is a rich harvest. Rainfall deficiency has come down and we have to wait and see how the rabi crops fare. If harvest is bountiful, be assured, demand all over, India Inc and trucks will boom as moods are good.