As Tata Motors gears up for a three-day closure of its Jamshedpur plant, it is all too clear that the medium and heavy commercial vehicle segment is in for hard times. The company will shut down its facility from November 29 to December 1 ‘as part of an aggressive effort to align production with demand’.
The idea is to ensure that there is no piling up of stocks at a time when the market for M&HCV (medium and heavy commercial vehicle) is seeing a free fall.
Ashok Leyland sales dip
While Tata Motors saw its October sales crash 28 per cent to 12,121 (16,823) vehicles, the overall M&HCV segment fell 23 per cent in that month to 20,836 units, down nearly 7,000 units.
For Ashok Leyland, the other major player in this segment, sales of this category of vehicles fell 13 per cent to 4,419 units in October compared to the same month last year.
In the first half of this financial year, the M&HCV sales slumped 14 per cent to 161,533 vehicles from 187,818 units in the same period last year. “This is a cyclical industry that sees its share of ups and downs. There is bound to be a recovery as was the case during 2008-09, except that it will be a lot slower,” a top industry official said.
The disturbing trend this time around is that big user industries like coal and mining are seeing a ‘huge slump’ in activity which does not augur well for M&HCVs.
“Just look at the industrial output figures for this fiscal and you will get an idea of how bad things are. This is going to be a painful period,” the official added. It is this hard fact that makes this slowdown quite different from 2009, in that economic indicators do not suggest any recovery happening in a hurry.
The positive in this otherwise grim scenario is that sales of 9-12 tonne vehicles have been buoyant — a category where sources say
Eicher, in particular, has done very well.
Some positives
The other piece of good news is that the light commercial vehicle segment continues to see brisk demand, as is the case with the Tata Ace, Ashok Leyland’s Dost and the Mahindra Maxximo. LCV sales for April-October were up 24 per cent to 208,715 units. While overall economic growth this year is expected to be barely five per cent, the commercial vehicle industry believes things could be a lot worse during 2013-14.
“The Government will be far too preoccupied with the elections and food and oil subsidies will just go through the roof,” sources said.
At this point, nobody has a clue when the recovery cycle will begin.