The market will remain slow and very challenging during the short term, opines Gurmukh Singh, Senior General Manager (Sales and Service), York Transport Equipment India
Impact on Business and Recovery Strategy
The overall market sentiments will be depressed owing to the lockdown with buyers putting off investments and non-essential purchases as their income levels plunge. This will delay the industry’s recovery prospects by about five to six months. Recovery in rural income and an improvement in the overall economic activity will be crucial for a meaningful improvement in core sectors responsible for generating demand in CVs. With the help of our parent company, SAF Holland, we have expanded our presence of heavy-duty axles and mechanical suspensions in Europe, South Africa, the Middle East, Indonesia and Australian markets.
Since the initial five to six months of FY 2020-21 will be very slow in the domestic market we will have to rely on export to these countries. For the domestic market our focus would be to provide more aggressive after-sales service support to our existing customers. Recently we have extended warranty by three months for all the trailers fitted with York products to support transporters. We are also looking for increasing the warranty period for our complete range of products to support our customers and reduce their cost of ownership for York products.
Also, we are going to launch various new products during the first half of the current financial year to reduce maintenance cost for our transporters. A 12-ton axle with 4 lakh km grease interval has already been introduced a few months back. We are going to launch a 13-ton capacity axle with 5 lakh km grease interval and also disc brake axles very soon. Further, as transporters are finding better tyre life and more payload capacity in air suspension trailers, we are going to launch another updated 14-ton capacity air suspension shortly for the Indian market. It will be useful for all kinds of road conditions and applications in India.
BS-VI Transition
There will be more uncertainty during the May–June period as we will continue to find virus infection cases. Hopefully, by June end, we will start seeing light at the end of the tunnel to be able to imagine how this whole thing will eventually shape up. I expect that the drop would be about 60-70% in the April to June quarter compared to the last financial year for heavy commercial vehicles. I also believe that the economy will start limping back to a new normal status from July to September of the financial year 2020-21, expecting 50-60% of the last financial year. As pre-buying of BS IV vehicles was not as per expectations, it will also help to generate demand from October 2020 onwards.
Expectations from Government
A major issue for fleet owners is a sudden rise in unplanned expenses to the tune of about 51%. The recent decision of the RBI on EMI moratorium has deepened the cash issues of fleet owners. Also, the absence of government’s support to facilitate the movement of cargo-laden stranded trucks has further widened the financial losses of the fleet owners. There is a need to extend the loan duration instead of moratorium by the government. Also, urgent special financial assistance for the transport sector should be provided by the government to overcome immediate cash flow problems for fleet operators and logistic companies.
Recently, the RBI announced a provision of Rs 50,000 crore refinance support to all Indian financial institutions and this will help to improve liquidity in the market. The hike in WMA limit for states is also a good step. We expect short-term measures like 10% reduction in GST on CVs and trailers till September 30, 2020. Similarly, the scrappage policy should be introduced in May with the support of extra incentives like reduction in road taxes, insurance, etc. to boost demand.
Outlook: Present and Future
From the past one month this industry has been experiencing hard times due to the virus pandemic and lockdown restrictions that have disrupted the freight movement, raised the operating cost and panicked drivers and crew members. There are no exact estimates, but millions of truck drivers and fleet operators have been affected. Seeing the current situation, it is quite evident now that the first half of FY 2020-21 will be a complete washout. The supply chain will remain a major concern for at least the next 3-4 months.
One of the most imminent challenges will be the shortage of workforce across trailer manufacturers and suppliers as most of the factory workers have gone to their native places and they will not return unless the government is able to resolve the pandemic issue. However, relief packages announced by the government will help to bring momentum from the second half of this financial year. As such, FY 2120-22 is expected to be much better.
Medium to Long Term Impact
The market will remain slow and very challenging during the short term as sentiments of consumers will remain down for four to five months. However, the long-term impact seems to be favouring the Indian component industry. With the initial outbreak of the epidemic in China, the risk of concentrating the supply chain to a single geographical region has come into focus. This has led to a strong thinking of building an alternative. Countries like India are seen as the biggest contenders. While leapfrogging to BS VI almost meeting the emission levels of Europe and the US puts us in a sweet spot.
This pandemic will change the working habits in Indian industry, especially SMEs and MSMEs. There would be more spending on automation, research and development and changing the hygiene practice inside factories. Employees will adapt good practices like washing hands on a frequent basis, wearing masks during either working inside the factory premises or moving in crowded places and also maintaining social distancing. This will help the Indian industry to uplift its standard and become more competitive as compared to Chinese companies.