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Monsoon, BS VI switch, govt steps to push auto sales in second-half of FY20

A slew of measures by the govt coupled with easing of liquidity conditions and revival in rural demand has kindled hopes of rise in sales of commercial vehicles. Data from SIAM showed sales of CVs declined 23% between April and Sept FY20.

, ET Bureau|
Oct 19, 2019, 09.11 AM IST
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Agencies
Commercial Vehicles
The switch-over to BS VI emission standards which will raise prices of commercial vehicles by 5-15%, is expected to trigger pre-buys from the end of the third quarter of the current financial year.
Government investments in infrastructure projects, better-than-expected monsoons, easing liquidity, pre-buying ahead of transition to BS VI emission norms are all expected to boost demand for commercial vehicles in the second half of the fiscal year.

Managing director of VE Commercial Vehicles, Vinod Aggarwal, said while commercial vehicle sales will remain in the red for the entire year, the pace of decline will moderate going ahead.

“There are several positives…the government has announced huge investments in infrastructure projects, several parts of the country has recorded surplus rainfall, the liquidity situation in the market has improved, interest rates have come down…the worst should be behind us. It should get better,” said Aggarwal. He added that while demand may not be at the same level as last year, local commercial vehicle industry will not see the type of drops that we have seen in the first six months.

Data from industry body Society of Indian Automobile Manufacturers (SIAM) showed sales of commercial vehicles declined 23% to 375,480 units between April and September FY20. It was in FY14 last that commercial vehicle sales had fallen by 2.8% to 614,948 units.

In its second term, the NDA government announced investments to the tune of Rs 100 lakh crore in infrastructure projects over the next five years. The finance ministry intervened to ease liquidity in the market in the past few weeks and the RBI slashed lending rate for the fifth time this year on October 4 by 25 basis points to boost demand and private consumption amid a broader economic slowdown.
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Meanwhile, surplus rainfall in many parts of the country has raised hopes of a good rabi (crops sown in winter which are harvested in spring) harvest, which in turn is expected to buoy demand in the rural economy.

“With future prospects of a strong economic growth - backed by a stable government at the centre and better road infrastructure we are confident that these are all indications of a revival in the mid-to-long term,” said Vinod Sahay, CEO, Mahindra Truck and Bus and Construction Equipment Divisions, Mahindra & Mahindra (M&M).

In the meantime, the switch-over to BS VI emission standards which will raise prices of commercial vehicles by 5-15%, is expected to trigger pre-buys from the end of the third quarter of the current financial year.

“The good thing will be that the large population of vehicles in India is not BS-IV. So there would be enough incentives. Many people who will be going for BS-VI have BS-II or BS-III trucks and when compared to these trucks the new vehicles will be far better in terms of power to weight ratio, reliability and fuel efficiency,” said Sahay.

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