Sales of commercial vehicles – a barometer of economic activity – are expected to post robust growth in the second half of 2021 driven by replacement demand and a pickup in construction activity amid easing of local lockdowns, industry officials said.
Heavy duty trucks of 18.5 tonne and more capacity are expected to drive the sales revival, they said.
“When recovery happens, it will start from heavy duty trucks, because they were majorly impacted the last two years,” said Vinod Aggarwal, managing director at VE Commercial Vehicles (VECV).
Even though the commercial vehicle manufacturers may not be able to recover fully the volumes lost due to the impact of the second wave of the coronavirus pandemic, sales of medium and heavy commercial vehicles (with capacity of more than 3.5 tonnes) in this fiscal year are expected to grow to more than 334,000 units registered in the last financial year, industry officials said.
“GDP outlook is good, monsoons are expected to be favourable, (and) infrastructure investments are lined up…so construction and mining segments will do very well,” Aggarwal told ET. “Haulage will pick up with business improving. So, we are optimistic that in the balance part of the year, the situation should be much better as far as the commercial vehicle industry in concerned.”
Prior to the second wave of the pandemic, the industry was expecting sales in the segment to touch 400,000 units in FY22.
Demand for heavy duty trucks was hit the hardest in past two fiscal years due to the economic slowdown and a revision in axle-load norms, which permitted carriage of additional payload in existing trucks.
Sales of such trucks are expected to cross the 300,000 mark within 24 months, surpassing peak volumes of 295,000 units reported in 2018-19, industry stakeholders said.
Even though the implementation of Bharat Stage-VI emission norms has raised initial acquisition cost of trucks, improved technology has lowered total cost of ownership of these vehicles, they said.
Aggarwal of VECV said volume sales of heavy duty trucks fell to 111,000-112,000 units compared to the peak of 295,000 units recorded in FY19. “Based on our infrastructure, business and replacement cycles, sales of heavy duty trucks have to cross 300,000 units over the next 1-2 years, which is more than FY19,” he said. “There is no reason why it should not cross the earlier peak.”
The maker of Volvo and
brands of trucks and buses said it has built capacity to meet rising consumer demand as the market recovers. In December, it had inaugurated a new manufacturing facility in Bhopal set up at an investment of Rs 350 crore.
VECV has renewed its entire product portfolio while transitioning to BSVI standards. It has earmarked capital expenditure of Rs 400 crore this fiscal to prepare for the second phase of BSVI norms which are set to kick in in two years.
A portion of the capex will be utilised to expand the component division, which is receiving healthy orders for components, Aggarwal said.
“We are getting a lot of export orders from the US for the gears division,” he said. “We have very strong demand from other OEMs, agri-tractor industry, two-wheeler makers. Apart from that, investments are starting on BSVI 2, mandated from April 1, 2023. There will be more products from our stable, more export specific products for left-hand drive markets, more variants for India, to be launched at regular intervals.”
VECV will also decide on investing an additional Rs 150 crore on a paint-shop at its facility in Bhopal in the second half of the year if volumes improve, Aggarwal said.