USED CV SALES SEE UPTURN AMID AUTO SECTOR DROP

Commercial Vehicles Line Up at ShriramAutomall

Indian new commercial vehicle sales is witnessing a slowdown, whereas, those of used vehicles are seeing a momentum. This is mainly due to a pick-up in demand of LCV and ICV and the key reason is realisation. According to industry estimates, unorganised sector is selling five times of what organised sector is selling, 10,830 units a month.

According to a report from Shriram Automall, which holds 60-70 percent market share in the organised second-hand CV market, its price realisation has gone up by 15-20% from last year. However, slowing down in used heavy CV's, resulted in unit-wise sales drop by around 13 percent. Sameer Malhotra, CEO, Shriram Automall, says, last year, realisation for small vehicles increased to around Rs. 1.4lakh from Rs.1.2lakh, from Rs.2.15lakh to Rs.2.7lakh for LCV's and from Rs.3.5lakh to Rs.4lakh for HCV's.

On the other side, average overall sales which used to be around 8,000 units a year ago has dropped to 7,000-7,500 units in a month. Also, the overall volume of new vehicles of India's top four M&HCV makers fell by 59.5percent. In a developed country, the ratio of heavy trucks to light CV's is normally 1:3. In India, the ratio is not even 1:2, which, means there is more room for growth in LCV's.

M&HCV sales are seeing pressure due to various issues like new loading norms, turnaround time of trucks having increased after the goods and services tax and liquidity remaining a challenge. There is always a lag time between announcement and execution. Freight rates have not gone up, though there has been a rise in fuel prices. Due to this, there is consolidation in the industry and a lot of big players will play a wait-and-watch game or form alliances to hedge against further downtrend, said Sameer Malhotra.

According to Umesh Revankar, managing director at Shriram transport Finance (STFC), one of the country's largest CV financiers, his company should be able to grow 10 percent over the previous year on used vehicle disbursements. To support the target, the company has decided to increase penetration in rural areas.

The total in assets under management (AUM) of the new vehicles business at STFC during quarter ended June dropped by 5.7 percent to Rs.11,450 crore, from Rs.12,137 crore in the same period last year. However, the AUM for used vehicles grew by 6.7 percent to Rs.89,021 crore.