Demand slowdown in CV financing due to axel load norms, confusion in BS-VI
The slowdown in commercial vehicle (CV) financing is mainly about demand related issue, which is unlikely to improve before the BS-VI rollout, said R Sridhar, CEO of IndoStar Capital Finance, and TT Srinivasaraghavan, managing director of Sundaram Finance.
The slowdown in commercial vehicle (CV) financing is mainly about demand related issue, which is unlikely to improve before the BS-VI rollout, said R Sridhar, CEO of IndoStar Capital Finance, and TT Srinivasaraghavan, managing director of Sundaram Finance.
Srinivasaraghavan said a lack of demand in CV financing was "a big supply-side issue as the axle load norms, which kicked in last year, had a big part to play there and now with BS-VI confusion, I do not think these things are going to do anything dramatic.”
He further said that we do not expect a revival in the commercial vehicle market before BS-VI rolls out. “Therefore, I do not believe we should expect magic to happen. Certainly, the announcements that have come from the finance minister are great sentiment booster and to the extent that helps, it’s great," Srinivasaraghavan further added.
Sridhar said the small road transport operators comprise 70 percent of the commercial vehicle market.
In such a scenario, he said, “The depreciation benefit has come and gone in the past also but what is happening today is that economy is also slowing, so the freight rates have fallen.”
“Whatever boost you give, unless the GDP improves because the truckers are transporting industrial and agricultural produce, if that is slowing down; naturally it will be there,” said Sridhar of IndoStar. Sridhar added that in my career of 30 years, I have seen many cycles like this which keep coming and going, but unfortunately today there is also a liquidity issue which is playing with the NBFCs.
“NBFCs are major financiers of commercial vehicles. So you are unable to make out whether it is really a demand-side issue or is it arising out of liquidity, but it actually is demand,” he further added.
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