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Commercial vehicles see growth burst

Mumbai, Dec. 25: The commercial vehicle industry is awaiting better days, following the peaking of interest rates and the expected fall in freight rates.

Commercial vehicles, especially medium and heavy ones, are experiencing a wobbly run as sales have been affected by high interest rates. Tata Motors has sold 97,182 medium and heavy commercial vehicles this year, a 7 per cent decline over the previous year.

Tata Motors and Ashok Leyland account for 90 per cent of truck and bus sales in the country.

Analysts said a high base effect was a major reason for the drop in sales. The Supreme Court had banned over-loading in the previous year that led to robust sales.

However, vehicle manufacturers are showing cautious optimism for the next year, as they expect interest rates have peaked out and the rate of inflation will decline further, boosting demand. They think the situation will improve further in the long run, bolstered by a robust Indian economy.

Vaishali Jajoo, auto analyst at Angel Broking, said, “Although the commercial vehicle industry has not been performing well for the past few months, the long-term potential is bright.”

Jajoo expects the industry to show at least 10 per cent compound annual growth rate in the next five to six years.

She added that the sector normally grew at around 1.3-1.5 times the growth rate of the gross domestic product and there were indications of better times ahead.

For instance, freight rates for truck operators, which were flat for the past four months, were going up.

The Indian commercial vehicle industry has recently attracted a number of foreign companies such as Daimler, Volvo and Nissan who have entered into pacts with local players. Force Motors, formerly Bajaj Tempo, signed a joint venture agreement with German firm MAN Nutzfahrzeuge AG to make heavy trucks.

Betting on the strong prospects, Tata Motors is planning a slew of launches next calendar year. Tata-Daewoo Commercial Vehicle Company will develop its “world truck” in India and South Korea. The company will also make buses under a joint venture with Brazil’s Marco Polo.

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