The commercial vehicle (CV) segment will see a demand contraction of 8-14 per cent over the near term, according to Icra estimates.
The coronavirus pandemic has aggravated the challenges faced by the segment reeling under a slowing economic growth, overcapacity and complex financing environment. Hence, the segment will continue to have a negative outlook.
According to Shamsher Dewan, vice-president, Icra, “In particular, the truck segment has been significantly impacted over the past year, with volumes contracting by a sharp 42 per cent in year-to-date 2019-20. Excess capacity post the revision of axle load norms in July 2018 and faster turnaround of vehicles after the implementation of GST along with the slowdown in the economy weigh on the demand prospects.”
“Further, the rapid spread of coronavirus and the lockdown has had a significant impact on goods movement. Accordingly, the outlook for the next fiscal, especially the first half, remains weak,” he added.
Automobile dealers are seeking immediate financial support from car manufacturers and the government to tide over the current challenging business environment.
“We have not cut salaries or manpower in March and it is going to be tough to give salaries in April with zero earnings, zero cash flow,” said Ashish Harsharaj Kale, president of the Federation of Automobile Dealers Associations.
If the OEMs do not come forward to support at this juncture, they are going to face major issues in their sales network when normality is restored, Kale said, adding that some OEMs have announced financial support and he expects others to follow suit.