Interview: Senthil Kumar, Head of Commercial Vehicle, Manappuram Finance

Monday, January 13, 2020

TRUCKSDEKHO...

 
 

In an exclusive interview with Trucksdekho, the CV head at Manappuram finance elaborate the factors impacting the domestic CV industry, the importance of financing for trucks, how the company is growing in the commercial vehicle finance business, and the potential in the CV segment.

The automotive industry and the commercial vehicles sector is going through one of its toughest time. Could you give us an overview of the CV market?

The Indian auto industry is going through a difficult phase of falling sales and inventory build-up. The industry clocked double-digit growth of 14.2 %in 2017-18, bouncing back from the effects of demonetisation and GST. Although the initial months of 2018-19 witnessed good growth, it slowed down to single digits towards the middle of the year and rapidly lapsed into a drop in volumes as the year drew to a close, leading to production cuts.

The finance minister announced a stimulus package for the industry assuaging the negative sentiments though it might not change things on the ground immediately. Rising fuel costs, erratic monsoon, and lower farm prices dented rural sales. Commercial vehicle sales began feeling the heat due to two reasons: one, quicker turnaround times after GST, and two, the permission to carry higher loads for existing vehicles. In July/August 2018, the government increased the axle load limit for all trucks, increasing the operational freight capacity by 20-25 %, roughly equivalent to three years of incremental freight demand. The downtrend began from the festival season of last year.

Dealers who usually load up on inventory to meet the festive season demand saw limited offtakes and were left with piles of unsold stock, as dispatches from manufacturers continued in the hope of a revival. Estimates by the Federation of Automobile Dealers Associations (FADA) in February 2019, show inventory levels touched a peak 50-60 days for passenger vehicles, 80-90 days for two-wheelers and 45-50 days for commercial vehicles.

A far cry from the ideal level of three weeks or 21 days inventory advocated by the body. This necessitated production cuts from manufacturers and led to retrenchment. As of July 2019, average inventory for passenger vehicles came down to 25-30 days, thanks to production cuts and lower dispatches to dealers. The average inventory for two-wheelers ranged from 60-65 days and for CVs, from 55-60 days. Barring cars, the inventory levels for two-wheelers and commercial vehicles continue to be high even today.

Read more