The commercial vehicle segment, which went into recession in two financial years after 2018-19, has started picking up momentum from the last financial year.
The commercial vehicle segment, which went into recession in two financial years after 2018-19, has started picking up momentum from the last financial year.
According to Girish Wagh, executive director, Tata Motors, the commercial vehicle industry is expected to grow in double digits this fiscal, driven by favorable demand conditions amid pick-up in economic activity, though higher fuel prices and interest rates on vehicle loans. Growth is a headwind.
The commercial vehicle segment, which saw its peak in 2018-19 with an industry volume of over 10 lakh units, went into recession in the next two financial years, starting to pick up pace from the last financial year.
While it may take longer to reach the peak volumes again in terms of payloads, the industry may soon hit the previous peak amid increasing demand for commercial vehicles (CVs) with high payloads.
“I think last year, the economy started doing well again and we saw a growth of around 26% in the commercial vehicle market. We (Tata Motors) have grown by 33 per cent. We have outperformed the industry,” added Mr. Wagh PTI.
With reference to the last three years, he said, “FY19, our previous peak, was when the commercial vehicle industry volume crossed 1 million (units). After that, we have two years of downtime. FY20, which was the year of preparation for BS-VI transition and FY21, which was the year of COVID, if I may say so. In both these years, the market dropped and the FY21 volume was around 52% of the FY19 volume. ,
Responding to a query on the overall situation in the CV industry, he said, “We see the industry coming back. It may take some more time to reach the previous peak in terms of volume, but at the same time, I think in terms of payload, we should reach that earlier, as more payload vehicles are being sold today than in FY19. are. This, he said, is because of the demand for CVs generated due to infrastructure work driven by the government’s allocation for the area earmarked in the budget.
“Then there is a lot of work going on in the housing sector in urban areas. Overall consumption is on the rise and the rural growth story remains intact. All these combined, I see that the commercial vehicle industry should see decent growth this year,” he said. said.
Asked what could be the growth rate, he said, “We should see double-digit growth this year as well.” As far as Tata Motors is concerned, he said that we aim to outperform the industry like last year.
However, Mr Wagh said it will not be an entirely smooth ride for the CV industry.
“Needless to say, there are some headwinds. Be it fuel price inflation or the interest rates that are rising, that will increase the EMIs for the customers,” he said.
On a positive note, he said, “In the last few months, freight rates are also consolidating. It’s a function of demand and supply and if there are freight requirements, I’m sure use rates will increase, fleets will increase, and people will come forward and buy vehicles. So this year should also be a good year as it has been last compared to the previous year.” Commenting on the impact of rising commodity prices, Mr. Wagh said that it has been phenomenal.
“The rise in steel prices, the way it has happened, is mind-boggling. In commercial vehicles, the impact of the increase in steel prices is enormous as about 45% of our cost structure is directly impacted by steel. So the impact has been immense,” he said.
Tata Motors is trying to pass on the cost escalation through increase in the prices of its vehicles, he said, “We increased the prices almost every quarter last year but enough to pass it on to negate the rest of the impact.” No. We are stepping up our cost-cutting efforts.”
When asked how many rounds of price hikes the company would need to make to fully offset the impact of the increased commodity cost, he said, “It depends on the percentage hike you do. Lastly, what is important is how can we get our margin profile back. That’s what we’re seeing and we’re working on a comprehensive margin improvement program.”