India’s transport and commercial vehicles (CV) industry has started to see some upcycle in the market, indicating the start of a multi-year up-cycle. According to the Federation of Automobile Dealers Associations (FADA), 77,993 new CVs were sold in November 2022, as against 49,737 in the same period last year.
YS Chakravarti, MD and CEO at Shriram Transport Finance Company (STFC), in a CNBC TV18 interview, talked about the transport finance vertical and the trends shaping up the industry and said that there is also a lot of demand coming in for used vehicles in the market as of now.
“We are seeing this across segments. In fact, we are seeing this pickup in demand right from small commercial vehicles to medium and heavy commercial vehicles. We are also seeing demand coming up in construction equipment machinery,” he added.
The CEO further added that most of the new CV buyers, who are now running a 7-8 year-old vehicle, are moving into a 3-4 year-old vehicle to replace their existing vehicle. With this, the used vehicle stock has also started to arrive in the market, Chakravarti added.
The demand for used CVs could be attributed to two things - one is that diesel prices remain quite high and the second is the cost of a commercial vehicle. Even though international oil prices have started to cool off, diesel prices in the country remain largely the same as there's not been a major correction.
Chakravarti stated that the cost of new CVs now stands at an average of around 40-50 lakhs. This is mostly due to the supply side shortage and less availability of parts, similar to the passenger vehicle industry. Therefore, for an individual customer, who is in the market for one vehicle or two trucks, the cost will already reach a crore plus.
Chakravarti said, “The costs for an individual truck owner to go and buy a new truck is becoming a very expensive proposition and becoming difficult for them to break even. So what's happening today is our existing customers are increasingly also moving towards replacing it with a slightly newer vehicle.”
The CEO of Shriram Finance also revealed that almost about 20-25 percent of the company’s customers are in some kind of a business where they're using these commercial vehicles for capital use. Chakravarti stated that these are the customers that we are targeting for our business loans and vice versa.
Despite the demand for used vehicles being quite robust, the cost of the new heavy vehicles is probably being only met mostly by the fleet operators as they can pass the increased cost of the vehicle and the fuel over to the rate contracts.
Chakravarti also revealed that Shriram Finance is looking at a minimum AUM growth of around 15 percent for FY23-24, while the credit cost will be in the range of about 2.4 -2.5 percent.
New CV sales
In terms of new CVs sold in India, Tata Motors was the highest-selling CV maker in November 2022 and sold 30,282 units as against 26,469 units in November 2021.
Mahindra & Mahindra stood in second place with its CV sales at 20,081 units in the last month, up from 12,044 units in November 2021. Ashok Leyland is at the third spot with 13,084 units sold in November 2022 as against 7,879 units sold in the same period last month.
(Edited by : CH Unnikrishnan)
