CV segment recovery gaining momentum

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From left, Mr. K. Chandrasekhar, Chairman, MVAIA, Mr. Ashok Chhajer, President, MAHA, Mr. D. Arul Selvan, Executive Vice President & CFO, Cholamandalam Investment & Finance, Mr. R. Anand, Partner, Ernst & Young (Former Chairman of SIHPA), Mr. S.V. Parthasarathy, Head – Consumer Finance Division, Indusind Bank, Mr. D. Lakshmipathy, Chairman, SIHPA, and Mr. Kailashmull Dugar, Chairman, FCA

After passing through a protracted recessionary phase lasting over two years, the Indian commercial vehicle industry is now back on its growth track with rise in demand for medium and heavy commercial vehicles (M&HCVs) gaining momentum in the last couple of months.

This was stated by Mr. S.V. Parthasarathy, Head – Consumer Finance Division, Indusind Bank, while addressing a seminar on Budget 2015 jointly organised in Chennai by the South India Hire Purchase Association (SIHPA), Madras Hire Purchase Association (MAHA), Finance Companies’ Association (India) (FCA) and the Motor Vehicles & Allied Industries Association (MVAIA).

He said that, with the special initiatives announced in the Budget, the automotive industry is poised for fair growth in the coming days. For instance, during the last financial year, the medium and heavy commercial vehicle segment (M&HCV’s) reported sales of around two lakh vehicles. This figure was achieved within nine months of the current financial year (April-December 2014). Basically, the CV segment consists of three verticals, namely, goods carriers, passenger vehicles and tippers. While the passenger category reported sales of over 50,000 vehicles, the goods category capacity has already been absorbed during the nine-month period. Normally, the segment’s performance is in accord with the economy trend. 

Mr. Parthasarathy also pointed out that the volume of production of commercial vehicles has now touched 2.50 lakh units, which was earlier achieved seven years ago, in 2008. Next year, the industry is expected to touch a volume of three lakh units, of which the goods segment will contribute to 50 per cent of the total sales, and the tipper and passenger segments will account for the balance. The Government’s special measures for infrastructure improvement and introduction of the Land Acquisition Bill, Revival of Mining activities, etc., will ensure sustained growth of the tipper segment. Already there are clear indications of improvement in mining activities in States like Goa, Gujarat and Karnataka. All this would have their healthy impact on the automotive sector.

However, there are a few challenges ahead of private vehicle financiers with the steep increase in the share of public sector banks, which has now gone up from 20 per cent to 60 per cent. What is to be noted here is that there is now greater transparency in money lendings, resulting in a substantial reduction in personal cash transactions, Mr. Parthasarathy added.

Budget to turbocharge the economy 

In his detailed presentation, Mr. R. Anand, Partner, Ernst & Young, and former Chairman of SIHPA, said that it is an entirely different Budget as compared to the usual ones, and some of the proposals incorporated are easily understandable. In other words, Budget 2015 will turbocharge the economy of India.

He also pointed out that there are four game changers in the Budget: For the first time, the Reserve Bank of India (RBI) has made a formal agreement with the Government for bringing down inflation, which is a welcome feature; the Government decision to have a separate law for black money; establishment of Mudra Bank to address the problems of small-scale institutions, banks and financiers; and the proposal to introduce GST from April 1, 2016.

‘Intellectual Honesty’ Finance Minister

Mr. Anand also welcomed the Government’s recent initiative for the States to get a greater share of benefits as compared to the existing lower share. Also, the Finance Minister, Mr. Arun Jaitley, is considered a man of ‘Intellectual Honesty’ for having taken several major steps, including the one for solving the problem of stalled projects amounting to Rs. 8,80,000 crores. This would give a major push to the Prime Minister’s ‘Make in India’ campaign and also make the country popular for ease of doing business.

He also pointed out that India’s aiming at a gross GDP of Rs. 1 crore crores is a landmark in the country’s history. Overall, the Union Budget has a long-term vision.

Mr. D. Arul Selvan, Executive Vice President & CFO, Cholamandalam Investment & Finance, expressed his views on various tax proposals introduced in the Budget.

Earlier, Mr. D. Lakshmipathy, Chairman, SIHPA, welcomed the gathering.