#InTimesofCorona – No solace in mediocrity
It is too early to declare a quick recovery of the domestic CV industry. We may have to take the September vehicle sales figures with a pinch of salt.
The COVID-19 pandemic is precipitously made to fade away from all our popular discourses, although there is no valid reason to believe that the pandemic is itself pulling out for greater good. In the same way, the Indian commercial vehicle industry is desperately doing its best to obliterate the dry spell resulted by the pandemic, but the ‘devil’ continues to firmly linger around in the ‘details’. On the face of it, the vehicle sales figures of various truck and bus makers in the month of September 2020 have brought some rejoice to the CV town, with all OEMs registering just single-digit drop over that of last year. Overtly ‘optimist’ folks and Whatsapp experts were quick enough to declare an early recovery of the CV industry from the on-going crisis, while also questioning all those analyst predictions of a much longer trail for the segment to revive back to normal.
First things first, these folks miss two big elephants squatting squarely in the room. One, contracting de-growth is largely a reflection of the low base year figure. Remember how badly the CV industry was performing around the same time last year, reeling under severe drop in demand, with sluggishness in sales beginning even earlier around the third quarter of 2018-19. Further, we must also note that OEMs report their dispatches to dealerships as their monthly sales figures, which in actuality does not accurately depict the sales numbers, as dealerships stocks are not excluded.
Two, the revival in demand is seen only in the SCV and LCV segments. MHCVs – a ‘high-value’ product segment that is closely related to construction activities and manufacturing levels of the economy – have largely registered de-growth of over 20 percent YoY. Buses have not shown even a little sign of recovery. We have to keep in mind that a ‘crawling’ organic growth (without any industry or policy push) can be witnessed in every product segment – as the economic activities are resuming after unlock measures – but this can never be mistaken for growth recovery. After all, even paltry sales can statistically give us an impression of growth, if our base figure is simply zero! Do we really want to settle for this mediocrity?
The fact of the matter is that the ongoing economic depression that has dug a deep hole of about 24 percent in GDP is a completely ‘unheard-of’ instance in the country’s decades of economic growth. Unlike all previous downturns, this time almost all sectors of the economy remain disrupted, including the core industries and consumer economy, which are the life blood of the CV sales. This clearly means that the recovery is going to be slow-paced and gradual, and any notable revival of consumer demand is possible only after the pandemic is fully controlled and macro-economic uncertainty is rightly addressed. I would like to stress this even further – as I continue to do in this column over the last couple of months – because the industry requires effective stimulus. If we are contended with whatever the little ups in vehicle sales that we are witnessing at present, it will be difficult for the CV industry to consolidate the recovery in this critical phase and sustain the growth.
That said, there are some silver-lining in pandemic crisis that can have long-term positive impacts. The rising popularity of small and light CVs is one among them, which is expected to diversify and strengthen the market portfolio with better and competitive products. The pandemic period is driving shift in buying and service preferences among transporters towards pre-owned trucks and aftermarket spares and services across the country. Under-utilization of fleets and end of loan moratoriums are driving large number of trucks into the second-hand market. For those transporters whose demand is either intact or slowly opening up, used trucks are increasingly seen as ‘smart buy’ decisions. But how is this a positive development? Stay tuned for my upcoming article in this column for some interesting trends and trajectories of the used truck market at present.
I’d love to know what you think, email your views to dhiyanesh@motorindiaonline.in