Downturn in truck sector shows no signs of easing

The recession that has gripped the truck sector since April 2012 is showing no signs of easing. On the contrary if recent trends are any indication, it may become one of the worst downturns in the recent history of the sector. Even as truck sales take a beating, sales of spare parts remain strong during a recession as fleet operators extend the life of the truck by replacing critical parts rather than buying a new vehicle.

But for the first time, the truck majors are witnessing a fall in sale of spare parts as well - a clear indication that the current recession is much deeper than envisaged. "Spare parts sale normally deliver during recessions but in 2013/14 we are witnessing a fall in the segment," says Ravi Pisharody, executive director - commercial vehicles, Tata Motors Ltd.

Huge idle capacity in the sector - reportedly as high as 40 to 50 per cent on account of poor economic activity - accentuated by the mining bans that were in effect till recently, has caused the drop in the off take of spares.

The recession began during the 2012-13 fiscal among the medium and heavy commercial vehicles. It has proved to be very severe since then. Volume of medium and heavy commercial vehicles shrank in excess of 25 per cent in 2012-13 and 2013-14 fiscal years. The segment's volume in 2013-14 is estimated at around 1.60 lakh units as against the 2011-12 peak of 2.99 lakh units. The story is similar in the light commercial vehicle segment which also slipped into recession in 2013-14. Despite finance minister P Chidambaram's parting gift of a four per cent excise duty reduction, truck sales have not shown any signs of revival.

Experts say that commercial vehicle sales are always driven by sentiment and that has remained very poor in recent times. They do not expect any immediate revival. "Economic activity is the main issue. Things will turn around for the sector as industrial activity revives. But the climate is a bit uncertain for the one or two quarters," says Pisharody. The sector is hoping for a strong electoral mandate which could improve sentiments and infuse some optimism into the economy.