Truck and busmakers have attributed the decline in sales during April and May to the shortage of fuel injectors, a device that pumps diesel into cylinders of an auto engine.
There was a severe global supply constraint of fuel injection pumps complying with the new Bharat Stage-IV emission standards, market leader Tata Motors Ltd. said in a media statement. These issues are expected to be resolved shortly and full capacity will be available by July, said the company whose volumes fell 40 percent over a year ago to 6,522 units in May.
Brokerage HDFC Securities concurred. “Lower medium and heavy commercial vehicles volumes dragged overall CV volumes, owing to supply constraints of BS-IV engine components,” it said in a report.
Bosch, the largest supplier of such parts, declined to respond to an email seeking reasons for the shortfall, and the expected recovery period.
While April and May largely followed a pattern as sales of medium and heavy commercial vehicles continued to fall over a year ago, the reason cited this time is unique. Industry experts, however, said slower sales can't be blamed on fuel injectors alone.
The fall in CV sales during April-May seems to be due to two reasons: the pre-buying before BS-IV norms were enforced, and the uncertainty before GST (goods and services tax). Operators want to know the full impact of GST; there seems to be some uncertainty about how they will be impacted.Abdul Majeed, Partner (Assurance), PricewaterhouseCoopers India
The Supreme Court denied auto companies any relief and barred sale of older BS-III vehicles from April 1, making it mandatory for all vehicles sold after that to comply with the stricter emissions norm, which warranted price hikes.
Anticipating the price hike, several fleet operators advanced their purchases to February and March, pushing volumes higher during those months and at the same time building fleet capacities.
Pre-buying before implementation of BS-IV would have been a cause for the fall in sales during April-May, agreed Kumar Kandaswamy, senior director at Deloitte Touche Tohmatsu, adding that the shortfall in supply of parts can't be the only reason.
There was uncertainty in the run up to the GST in April and May, which is likely to continue through June. Medium and heavy commercial vehicles will be taxed at 28 percent under GST, marginally lower than the cumulative exiting rate of around 29 percent.
People would expect prices of commercial vehicles to go down post GST rollout and hence the wait.Kumar Kandaswamy, Senior Director, Deloitte Touche Tohmatsu
Also, GST is likely to do away with the state taxes levied at borders for transit of commercial vehicles. This would significantly reduce the time taken to pay such levies as they would be collected at one point under GST. This, Majeed said, would be another aspect fleet operators would want clarity on before making purchases, as the tonnage of vehicles might have to be altered to increase efficiency.
“The freight demand has also not gone up significantly over the recent past. Most operators seem to be utilising around 70 percent of their capacity,” Majeed said. “In such a situation, new purchases are not required, hence people seem to be holding off.”
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