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    ‘Pre-buying of commercial vehicles gaining momentum’

    Synopsis

    Daimler India Commercial Vehicles (DICV), the maker of Bharat Benz trucks, expects January-March quarter (Q1) to be positive after decline of multiple quarters, and is hoping for sops in the upcoming budget to drive consumption and cushion the decline that is expected post price increase of almost 10-15% in Q2 and Q3 of 2020 due to the implementation of BS-VI norms-compliant technology.

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    MUMBAI: Contractors with infrastructure projects have started to get paid and with additional fiscal fillip widely expected in February’s annual budget just before BS-VI emission norms kick in later in April, pre-buying of commercial vehicles is gaining momentum.

    Daimler India Commercial Vehicles (DICV), the maker of Bharat Benz trucks, expects January-March quarter (Q1) to be positive after decline of multiple quarters, and is hoping for sops in the upcoming budget to drive consumption and cushion the decline that is expected post price increase of almost 10-15% in Q2 and Q3 of 2020 due to the implementation of BS-VI norms-compliant technology.

    Satyakam Arya, managing director of DICV, said the liquidity situation in the market has improved and thanks to the government payout to contractors, the offtake in the market has improved too. “All fleet owners know that the cost will go up and we have seen a change; some of them over the last few weeks have resorted to pre-buying. They have said that they have received the payment; new contracts are getting awarded. Scrappage policy, if defined well, can also help the industry,” added Arya.

    The DICV head said he is hopeful the finance minister will put out a budget that boosts consumption and revives investment, which may pull the industry out of this prolonged slowdown.

    IIP growth turned positive in November after declining for four consecutive months. Capital expenditure by the Government of India has gained momentum after a tepid start at the beginning of the year.

    After witnessing a 4% drop in the first four months of this financial year, government capex grew 32% during August to November to Rs 1.06 lakh crore, ETIG data compiled from the Controller General of Accounts showed. In the first eight months of this fiscal, it grew 11.7% to Rs 2.13 lakh crore. The budget estimate for FY20 had projected the figure at Rs 3.38 lakh crore.

    The Union government’s capex is expected to rise further in the next fiscal if the targets for the national infrastructure pipeline are met. Infrastructure spending as a percentage of the gross domestic product is expected at 8.6% in FY21 as compared to 6.6% in the current fiscal, according to Axis Capital.

    The pick-up in the infrastructure projects augurs well for the heavy truck makers given that nearly half the truck demand comes from this segment. It must be noted that heavy truck market and IIP growth have high positive correlation.

    However, Arya cautions that despite demand rising in Q1, the market for medium and heavy trucks is likely to slip by another 10% this year to about 2.2 lakh units as against 2.49 lakh sold in 2019, making it the second consecutive year of decline after the industry registered a 34% fall in sales in 2019 from 3.78 lakh units sold a year earlier.

    On its part, the company has come out with a new range of trucks, which it claims is 10% better on fuel efficiency and has 6% lower maintenance cost than the outgoing BS-IV trucks.


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