Tata Motors' comeback in MHCV segment helps lift CV sales in August

Key highlights:

• Double-digit growth in sales in both LCVs and MHCVs in August
• Tata Motors' MHCV truck sales grew of 51.96%
• Tata Motors' MHCVs witnessed strong pick-up in demand on the back of continuously increasing acceptance of the SCR technology

Commercial vehicle (CV) sales in August made a surprise turnaround as companies posted a double-digit growth in sales during the month. This was mainly due to the double-digit growth in sales in both the light commercial vehicles (LCVs), and medium and heavy commercial vehicles (MHCVs) in August.

The main surprise was the growth in Tata Motors' CV sales which saw its domestic sales rise up by 34.53% at 31,566 units last month as against 23,464 units in the year-ago period.

This was due to a large growth in its truck sales. Overall sales of Tata Motors' MHCV truck sales were at 10,926 units as against 7,190 units in August 2016, a growth of 51.96%.

The second largest commercial vehicle manufacturer, Ashok Leyland, too posted a large growth in sales during the month of August.

Ashok Leyland reported a 25.11% increase in total sales at 13,634 units in August. The company had sold 10,897 units in the same month last year.

Sales of MHCV grew by 28.85% to 10,567 units as against 8,201 in the year- ago month, the company said in a statement. Light commercial vehicle sales rose 13.76% to 3,067 units compared to 2,696 in August last year, it added.

However, the main reason was the recovery in sales of Tata Motors' commercial vehicles segment.

Tata Motors' MHCVs witnessed strong pick-up in demand (52% YoY to 10,926 units) on the back of continuously increasing acceptance of the SCR technology and higher demand for tucks and tippers, said a HDFC Securities report.

SCV and pick-ups rose 35% YoY driven by increasing demand for new products (Tata Ace and Tata Xenon Yodha Pickup).

Tata Motors Head Commercial Vehicle Business Unit Girish Wagh attributed the reason for this large growth in sales due to increased imposition of restrictions on overloading, growing momentum in infrastructure, mining and construction segments that have boosted the demand in the MHCV segment.

Tata Motors, which is the largest manufacturer in the MHCV segment, has 52% market share, followed by Ashok Leyland with 29% market share.

Tata Motors has been struggling recently in its MHCV segment and had seen its market share slip and was even losing ground to competitors such as Ashok Leyland.

The company even highlighted this in its annual meeting recently and now looks to focus more on the commercial vehicle segment, given that it is the primary revenue earner for the company.

Wagh said, “In line with our turnaround strategy, we will be introducing new products and will continue to undertake appropriate measures to improve our performance across segments.”

A slew of policies implemented recently had impacted the companies MHCV sales, starting from demonetisation to the Bharat Stage IV transition and the roll out of the goods and service tax (GST).

Tata Motors' domestic CV sales in April had declined by a large 36%, while in May it declined by 13%.

During the month of May MHCV truck sales declined by 40%, which was primarily affected due to severe global supply constraints of fuel injection pumps for BS4 engines, said the company.

However, in June it managed to make an improvement with only a 2% decline in CV sales and the MHCV sales grew by 1%.

By July it has improved as its CV segment posted a 15% growth in July due to ramp-up in BS4 production across segments. Sales in the MHCV truck segment grew by 10% in July.

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