New truck sales crash amid oversupply

Last Updated: Mon, Feb 04, 2013 05:31 hrs
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Truck sales continued to fall in India for the 11th month in a row in January as fleet owners postponed replacement purchases amid costlier lending rates and weak freight demand.

With supply outstripping the current requirement of truck services in the country, coupled with a dip in resale value of used trucks by as much as 30 per cent, several truck owners are forced to delay purchase of new vehicles. This, along with stagnant freight rates over the last two months and a dip in demand for tippers and mining trucks due to closure of mines at various locations in the country, resulted in a significant drop in new truck demand.

"The overall industry truck sales crashed 38 per cent in January, despite availability of new year models in all categories and huge allurements from commercial vehicle dealers in terms of large discounts, ranging from Rs 80,000 to Rs 200,000 per vehicle," the Indian Foundation of Transport Research and Training said in a report. Mumbai-based Tata Motors Ltd, India's largest commercial vehicle manufacturer, saw a 52 per cent drop in sales of medium and heavy commercial vehicles (MHCV) last month, its biggest monthly fall in four years at 8,722 units against 18,338 units sold in the last corresponding month. Chennai-based Ashok Leyland Ltd, the country's second biggest CV maker, reported a fall of 25 per cent in the same month selling 6,863 units, compared with 9,200 units of MHCVs sold in the year-ago period.

The demand drop did not spare even the new and relatively smaller entrants. Mahindra & Mahindra Ltd, along with Navistar, which has been trying to gain a foothold in the heavy truck market, saw a drop of 34 per cent in January to 1,024 units against 1,543 units in the year-ago period.

"Over 5.6 million trucks are plying on Indian roads today. The demand for new trucks has been weak for the past several months because existing trucks are more than enough to take care of the current requirements. Therefore, people who bought their trucks with the idea of upgrading in four years are not doing so because there is no need for that," said an analyst.

The manufacturing sector, particularly the small and medium enterprises industry, is in disarray due to low demand, and consequent lower cargo offerings from manufacturing units has forced the truck operators to put on hold the new purchases.

Tata Motors had to shut production for the fourth time this financial year at its truck manufacturing unit in Jamshedpur. The company had shut down the Jharkhand-based plant in the first quarter of the year followed by two more shutdowns undertaken in November and one last month. It had done so to avoid piling up of inventory with its dealers.

Ashok Leyland has cut its working days to five from six a week since December. The move is aimed at cutting production and saving on wages. According to data provided by the Society of Indian Automobile Manufacturers, sales of MHCV trucks dropped 22 per cent at 164,269 units during April-December, compared with 211,177 units sold in the same period last year.

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