New Delhi:
Overdue replacement cycle of commercial vehicles will drive recovery in the market, while demand for trucks is expected to start coming back from October-November onwards, according to a top official of VE Commercial Vehicles (VECV).
Despite the challenging market situation currently, the company, a joint venture between the Volvo Group and Eicher Motors Ltd, expects that truck makers may find it difficult to supply when demand starts coming back, especially when large fleet operators opt for efficiency and productivity to drive down operating costs.
"Even though the current market situation is very very tough, I am very optimistic because of a few reasons," VECV Managing Director and CEO Vinod Aggarwal told PTI.
In the commercial vehicle (CV) market, trucks are replaced by big fleet operators in five to six years, but the CV market dropped by 40 per cent in 2019-20, and "this year the first four months have been almost a wash out and the market has dropped by almost 85-90 per cent", he said.
"It means the replacement cycle which normally should have gone through last year has not happened. Similarly, this year the replacement has not yet happened. It does not mean that replacement is not required," Aggarwal said.
Two years ago, the government increased axle loads following which customers started loading their trucks with revised loads, even though those trucks were not designed to carry those extra loads, he added.
"All those redesign has happened this April 1, when BS-VI migration happened," he said, adding that VECV has ensured that all its new trucks are designed to carry the extra load.
"Therefore if you drive for the best productivity, it means you will have to go in for replacement of the old trucks where you were carrying the extra loads with trucks which are not designed to carry those loads. It means you need more replacement," Aggarwal added.
The normal replacement cycle has not gone through and secondly, replacements have to happen because of the axle load norms, he said.
"So there will be huge replacement demand which will get generated due to past pent up, axle load related and current replacement (requirements).
"So you will see demand coming back very fast and when that happens, I think there will be difficulty in supplying the trucks," Aggarwal asserted, adding that the normal replacement cycle is expected to start by September.
He further said, "Truck demand will start getting better with the start of the festive season from October-November onwards. Economy will recover in six to eight months and infrastructure investments will also start happening and based on that you will see better CV demand."
When asked if the current situation of the economy won't hurt demand, he said, "Of course the current situation is very challenging, but at the same time whatever goes down that goes up, that's the natural principle. The situation is not going to stay like this."
Though the economy is not in the best shape currently, things will come back to normal in six to eight months, he said.
Meanwhile, according to a senior official of Toyota Kirloskar Motor (TKM),.automobile demand is picking up but the over-sensitivity and jitteriness of financial companies such as banks and NBFCs are dampening the real conversion of orders to deliveries,
With the kicking off of festive season, the company has witnessed up to 30 per cent higher flow of orders in August compared to July, although in the last four months it has ensured that 25 per cent of wholesale is reduced every month in order to avoid inventory pile-up at its dealers.
"The number of orders that are flowing in are far higher as compared to July. I would say at least 20-30 per cent higher. One of the issues we are facing is that the financial companies, including the banks and the NBFCs are little jittery about any kind of non-compliance," TKM Senior Vice President, Sales & Service Naveen Soni told .
He further said, "As far as order intake is concerned we are very happy. Everyday we only see good intake in terms of fresh orders but order to delivery time, while we are providing the vehicle accurately based on our supply system, is taking a bit longer because of the issues with financial companies."
Stating that auto companies are not asking financial institutions to give out loans irresponsibly, he said there needs to be a consistency in the 'yardstick' of measuring consumers who qualify to avail of car loans.
At the same time, Soni said due to the COVID-19 pandemic-induced lockdown, time taken to do field investigations before approving and sanctioning of loans has also increased.
On the demand side, he said with festivities such as Ganesh Chathurthi and Onam falling in August, the pick up has been definitely better and running at a higher pace than July. The demand has been progressively increasing each month since May after the total washout in April.
In terms of production, he said, "In the last four months, every month despite sales increasing we have made sure that 25 per cent of wholesale is reduced so that stock is reduced at the dealer end. Every month we have been reducing stock month-on-month so that the dealer can manage customer needs at a lower inventory carrying cost."