Domestic sales of commercial vehicles (CVs) are set to touch a new milestone during FY 2017-18. They will cross their earlier peak of 809,499 units sold in FY 2011-12.
The FY18 is slated to better this record by over 20,000-30,000 units, as the 11-month (April-February 2017-18) period has already experienced sales of 747,774 units, according to SIAM(Society of Indian Automible Manufacturers) data.
During the month of February 2018, sales of total CVs were pegged at 87,777 units. The sales trend over the years have witnessed the closing month of the financial year -- March, to experience the highest sales during the year.
Hence, the March sales of CVs are expected to be over 90,000 units that will enable total sales to cross the FY12 peak by a large margin.
Recovery in the economy and pick up in infrastructure projects have boosted sales of medium and heavy commercial vehicles (MHCV). Two consecutive years of monsoons and a stable interest regime have led to larger loans being taken for buying light commercial vehicle(LCV) in semi-urban and rural markets as well.
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This has led the foundation for the larger buying spree during March 2018.
Vishnu Mathur, director general of industry body SIAM, told ETAuto that buyers hold their money or invest elsewhere to earn interest on it. Before the FY ends, they spend it on vehicle purchase that entitles them to claim commercial venture depreciation on the vehicles purchased during the full year to the tune of 30-40 per cent of the vehicle value. This maximizes their revenue.
In addition, companies offer discounts during the last month of the financial year in order to meet their annual targets.
CV Domestic Sales Trend
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“Earlier (about 7-8 years ago), CV manufacturers used to dump their inventories at dealerships in order to meet their targets for the year. This would raise the cost of holding inventory for the dealers. But currently this practice is not followed. Now companies offer discounts ranging between 7-8 per cent to give a fillip to sales during March,” said Subrata Ray, senior Group VP of rating agency ICRA.
But since the MHCV sector has been on the upswing for the last few months, discounts are expected to be lower this year.
He also feels depreciation of around 50 per cent in March can get the buyer six-month benefits.
So March is expected to see a spurt in buying activity, post which April will see a subdued market.