Tata Motors, Mahindra CV sales begin FY2020 in slow lane

After selling a million units for the first time ever in a single year in FY2019, commercial vehicle (CV) sales have turned uncertain in the first month of FY2020. Market leader Tata Motors and challenger brand Mahindra Truck & Buses’ sales in April 2019 saw de-growth while those of Ashok Leyland and VE Commercial Vehicles remained in positive territory.

While FY2020 is expected to end on a good note mainly due to aggressive pre-buying ahead of BS VI emission norms kicking in from April 2020, the fact of the matter is that the road to end-FY2020 is going to be rough. While there is no clarity as to when pre-buying will start, OEMs are preparing to cater to that additional demand by getting their assembly lines ready for BS VI-compliant products at least a quarter before April 2020. 

Another sales speedbreaker has been the increase in axle load norms in July 2018 which increased overall cargo capacities across M&HCVs and saw fleet owners reduce their number of purchases.

Tata Motors says, “M&HCV cargo trucks continue to witness sluggish sales with the implementation of revised axle-load norms. The slowing economy along with purchase deferrals during the election season has contributed to subdued demand for M&HCV cargo trucks.”  

How the OEMs fared in April
Market leader Tata Motors’ overall sales in the domestic market fell by by 18 percent to 29,883 units in April 2019 (April 2018: 36,276). The key M&HCV truck segment dropped by a massive 33 percent to 9,403 units (April 2018:14,028). It seems the fast-growing tipper segment is coming under pressure; Tata Motors sold 3,438 units for a marginal 1 percent growth.

The company’s ILCV sales were up 10 percent at 3,546 units, led by the e-commerce sector and discretionary consumption. Sale of cargo SCVs and pickups dropped by 4 percent to 13,996 units and likewise, the commercial passenger carrier (bus) segment saw sales of 2,983 units (-33%), being impacted by the slowdown in the procurement of buses by STUs and the permits for private hiring. Nonetheless, school bus demand remains strong with volumes likely to pick up in the next couple of months as school re-open after the summer break. Tata Motors is gearing up to roll out its buses that meet the new AIS 153 regulations. 

Ashok Leyland is the only major CV maker to register double-digit growth in the month with total sale of 13,141 units (April 2018: 11,951). Its M&HCV numbers rose 8 percent to 8,918 units, while LCVs, backed by the popular Dost trucks, maintained double-digit growth of 10 percent growth with4,223 units sold (April 2018: 3,697).

Mahindra & Mahindra’s CV sales declined across all segments with overall numbers down by 9 percent to 17,321 units (April 2018: 18,963). M&HCV sales fell sharply by 48 percent to 474 units. Its sales in the below-3.5T GVW segment,  where the company’s popular Bolero pickups have recorded highest sales in FY2019, was down 7 percent YoY to 16,284 units (April 2018: 17,495), while those in the above-3.5T GVW segment were flat at 563 units.

VE Commercial Vehicles’ sales grew by 8 percent in April 2019 at 3,663 units (April 2018: 3,390 units).

It’s early days yet in the CV sector in FY2020. Once the general elections are over later this month, the onset of an above-average monsoon and continued spending on construction and infrastructure activity is likely to act as a catalyst to truck and bus sales. In comparison, demand for heavy trucks may continue to be sluggish but some models like ILCVs, tippers and buses could see some traction in the near-term.