Slowdown Blues: Ashok Leyland reports 50% slump in domestic sales

Ashok Leyland, India's second largest commercial vehicle manufacturer, on Tuesday reported a 50 per cent decline in total domestic sales at 8,296 units for August. The Hinduja Group flagship firm had posted domestic sales of 16,628 units in the year-ago month. But if exports are factored in, cumulative sales have dipped 47 per cent to 9,231 units last month, the company said in a statement.

The worst affected category was the high tonnage trucks. Sales of the M&HCV (medium and heavy commercial vehicle) trucks stood at 3,336 units, down 70 per cent year-on-year. The M&HCV bus category fared much better in comparison, posting a 3 per cent dip while the light commercial vehicle category saw a 12 per cent drop in sales in August to 3,882 units.

However, Ashok Leyland is not the only player in the business to report such dismal figures. Sales of M&HCVs, excluding buses, which are considered a barometer of economic activity, more than halved in August, as transporters deferred purchases, the Business Standard reported. The overall volume at India's top four M&HCV makers - Tata Motors, Ashok Leyland, Volvo Eicher, and Mahindra & Mahindra - fell 59.5 per cent y-o-y to 31,067 units during the period under review.

The dipping sales come against the backdrop of India's GDP growth rate dipping to a six-year low of 5 per cent during the first quarter of the ongoing fiscal. Growth in eight core sectors slipped to 2.1 per cent during July against 7.3 per cent during the corresponding month last year, as per the latest government data. The manufacturing sector fared even worse, growing at an abysmal 0.6 per cent. The country is now looking at a below 6.5 per cent growth in 2019-20 - against earlier predictions of 6.7 -7 per cent - unless something drastic happens in the economy.

"A subdued demand sentiment due to poor freight availability, lower freight rates, and a general slowdown in the economy continued to hamper the commercial vehicle demand," Girish Wagh, president (commercial vehicles), Tata Motors, told the daily. The market leader saw a year-on-year decline of 58 per cent to 5,340 units in heavy-duty trucks.

Sinmilarly, volumes at Volvo Eicher Commercial Vehicles and M&M contracted 41.7 per cent and 69 per cent, respectively. All these companies are now keeping their fingers crossed for sales to pick up in the coming festive season while rolling out massive discounts of up to Rs 9 lakh on high-tonnage trucks currently amid tepid demand. According to Shamsher Dewan, vice-president and sector head, corporate ratings, ICRA, discounts on new commercial vehicles continue to ranging between 10 and 15 per cent of the ex-showroom prices.

Meanwhile, movement of truck fleets also got impacted by floods in several states, which, in turn, cut the arrival of fruits and vegetables in the Agricultural Produce Market Committees (APMCs). At the same time, factory gates at most of the industrial clusters turned in 25 to 30 per cent lesser goods, said the Indian Foundation of Transport Research and Training in a note on Tuesday.

The crisis in the auto sector is a huge problem for the Modi government, which is expected to provide further stimulus to boost growth in the near future. The latest sales numbers " highlight the need for the government to consider reducing the GST (goods and services tax)", Rajan Wadhera, president of the Society of Indian Automobile Manufacturers (SIAM), told Reuters, adding that cutting taxes to 18 per cent from the highest slab of 28 per cent at present would lower the cost of vehicles and create demand. All eyes are now on the upcoming GST Council meeting, scheduled for September 20 in Goa.

With Reuters inputs

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