CV Dealerships – On a comeback trail

CV dealers are well and truly back on track as far as business post-COVID is concerned. The dealers covered in this exclusive feature exude positive yet guarded outlook for FY 2021-22 thanks to gradual opening up of the economy and usual business activities on road to recovery, observes Rajesh Rajgor

The sales of trucks and buses in India is considered a key barometer for the overall health of the economy. However, the COVID-19 lockdown and emission norms transitioning from BS-IV to BS-VI, curtailed immediate spending, in tune of what was expected last year. The effect of this was well documented and dealership across the country faced the heat with all-time low sales. Volumes dropped to as low as 92 per cent YoY during the Q1 of FY 2020-21 in M&HCV and around 85 percent YoY in light commercial vehicles. The industry started to show signs of recovery in passenger and small commercial vehicle segments, as soon as the phase wise unlock began, providing some movement and respite to the ailing dealer fraternity. Credit, primarily to last mile connectivity needs, rising rural demand and movement of essential goods across the country.

Almost all dealers featured in the section shared that SCVs and LCVs kept the ball rolling along with renewed emphasis on service and availability of spares. They also agreed that government infrastructure spending should help the M&HCV segment to bounce back. The need for specially built vehicles, like refrigerated trucks, cash vans and refuse vehicles, shall also spur demand in medium term. Almost everyone looks optimistic and hopeful towards the government announcement of scrappage policy for passenger vehicles older than 15 years and commercial vehicles older than 20 years in the Union Budget 2021. Though voluntary in nature to begin with, it is expected to open up avenues for the domestic automobile sector by creating a steady stream of demand.

Industry leaders too have hailed the Union Budget 2021 for its vision to propel us further towards Atmanirbhar and nation-first requirements. They agree in unison that this shall help redefine economy in a post-pandemic time. It is also important to note that the focus on building rural and agricultural infrastructure and prioritizing agriculture credit growth will have long-term positive impact on rural demand for vehicles. Even though the monthly vehicle registration data for January’21 published by FADA in its press statement, highlights a 10 percent drop YoY at 15,92,636 units as all major segments barring tractors registered a drop in numbers; it appears to be the result of unavailability of key components that has affected manufacturing.

FADA President, Vinkesh Gulati said, “After witnessing a one-off growth in December, January Auto Registrations fell once again by 10% YoY. Auto Industry clearly misjudged the demand which returned post lockdown. Industry’s under estimation of post-COVID rebound along with chipmakers prioritizing higher-volume and more lucrative consumer electronics market has created a vacuum for semiconductors. This has resulted in shortage in supply for all categories of vehicles especially Passenger Vehicles even though enquiry levels and bookings remained high. New launches and SUV’s continued to see high traction and helped in restricting the overall PV registrations fall by a bigger margin. The recent price hike undertaken by Auto OEMs also added to woos as Two-Wheeler have become more expensive for lower- and middle-income class. Commercial Vehicle registrations were also hit due to vehicle financing still not back to normal and high BS-VI cost.”

The dealers covered in this feature exude positive yet guarded outlook for the FY 2021-22 owing to gradual opening up of the economy and the usual business activities that are on road to recovery. The FADA statement also provides a peek into the expectations and sentiments of the dealers, with as many as 41 percent of the participants expecting immediate growth in February while 46 percent of them believing the market sentiments to be actually good, indicating that the CV dealerships are on a comeback trail.