The commercial vehicle segment showed remarkable improvement to finish September with a nominal drop of 3%. Kaushik Narayan, CEO and Founder, Leaptrucks, shares key observations from CV sales in the month gone by
2020 has been an extremely tough year for CVs. In March, OEMs and dealers were battling to register BS-IV trucks amidst the lockdown to beat a Supreme Court directive. Unlock 1.0 and 2.0 did not provide much hope and the industry ended Q1 with a drop of almost 85% in comparison to the same period last year.
However, things have gotten progressively better for the industry in general over the last 3 months. July 2020 ended with a drop of around 33%, August 2020 was even better with a drop of only 15% and September 2020 has ended with a nominal drop of just 3% compared to the previous year.
Here are 6 key observations from the turnaround in CV sales:
- All OEMs have performed well: September has been a good month for all. We see that all OEMs have done very well under challenging circumstances. They have all performed with single digit growth of drop over the same time in the previous year.
- Stronger Supply Chain: OEMs have been able to streamline their supply chains. Supply issues due to imports and supplier plant shutdowns due to COVID-19 have minimised. OEMs are able to manage their supply chains well and we anticipate that this will continue to ease further in the coming months.
- Continued improvement: We have seen a consistent improvement in sales over the past 3 months. We anticipate that this will continue and that commercial vehicles will post their first annual growth in October 2020.
- Bright spots: The growth is being driven by bright spots in the economy which includes rural demand, e-commerce and last mile delivery. These segments will continue to stay strong for the rest of the year and are expected to be joined by a few other segments in the second half of the year.
- Beginning of replacement demand: While we have seen limited replacement demand until August, OEMs have started seeing better replacement demand in September 2020. This bodes well for OEMs as they prepare for a stronger second half of the financial year.
- Improvement in freight rates: Freight rates are improving across segments. With BS-VI volumes improving, we anticipate further improvement in freight rates to absorb the price differential between BS-VI trucks (and the BS-IV equivalent) which ranges from 15 to 20%.
Despite the positive signs, the CV segment has a big deficit to cover and has to make up for a drop of almost 55% in comparison to the first 6 months of last year. If September was any indicator of the current market trends, it certainly points to a strong recovery in the last 2 quarters of the year.
Leaptrucks is a marketplace for buying and selling used trucks, buses and construction machinery. To check out all their listings, visit: www.leaptrucks.com/listings.