Managing Director and CEO Vinod Aggarwal highlighted the rise in government capital expenditure and the resulting demand for materials such as cement and steel, which will drive further traction in the sector.
This is the verbatim transcript of the interview.
Q: We’re looking at a bit of a slow month, but how do you see September and October shaping up from now and over the year? If you could give us a rough guide, what kind of volume growth do you expect?
A: The months of July and August have not been very good for the industry as a whole. If we look at the figures for the sector, in July, for the commercial vehicle industry of 3.5 tonnes and above, the drop was around 8%.
If we look at August again, the decline was around 9%. Thus, in both July and August, the industry had fallen by 8% and 9% respectively.
This was not expected, so I would say first of all that the sector is underperforming. There are various reasons for this, and of course we have been trying to find the reason why the sector is performing like this. One of the reasons is that the monsoons have been prolonged, there have been floods in some states and the coal mines are also not fully operational. That is one of the reasons.
The other is capital expenditure, which needs to be done on infrastructure projects that are not yet fully operational. I hope that will start happening soon. And we see a lot of news indicating that the government is putting a lot of emphasis on spending more and more money on infrastructure projects.
So far, there has been a slowdown for this reason, which has made consumers a little more cautious and postponing their purchases. Otherwise, there is essentially nothing in the environment that goes against the decline of the commercial vehicle industry.
Q: So what should we work on this year?
A: We are very cautiously optimistic because the fundamentals are working well, because there is demand and there is good movement of goods. We are going to see the festive season starting in October and then we should see more replacements. Right now, replacements are also a bit delayed and infrastructure projects are not in full swing.
Read also | VECV CEO expects commercial vehicle industry to pick up pace from September
Construction truck sales last month were down 30%, which is very high for the industry as a whole. The good thing is that even though the industry is down, in both July and August we have grown. In August we grew 1% and in July we grew 12% year-over-year. So even though in both months the industry was down, we are growing.
As a result, our market share has increased compared to the previous year. In the heavy-duty truck sector, our market share is 9.6% and in the light- and medium-duty truck sector, our market share is 35% or more. So we are very pleased with our progress.
But the industry is expected to perform better in the balanced part of the year, and we are looking forward to that happening.
Q: Could you tell us what the plant’s capacity utilization is at the moment, given that demand is so anemic?
A: As far as we are concerned, our capacity utilisation is fine, though we would like to see it higher; for example, if we put Bhopal and Pithampur together, if our capacity is around 130,000 per annum, we are producing around 6,500-7,000 per month, which is a capacity utilisation of 60-65%.
Q: Every month we talk about sales being slow, a little bit of a disappointment, but from April to now (YTD), the YTD aggregate, I think, would be lower compared to the previous comparable period.
A: On a year-on-year basis, the industry is still growing marginally: there is growth of around 1% more because we had good growth in the first quarter. There is also some perspective, because last year, the first quarter was very weak. On a lower level, this year, in the first quarter, there was good growth. The industry had grown by almost 10%.
Q: Now that we are talking about the second half of the year, which segment within the commercial vehicle sector do you think can spark enthusiasm again? Will it be buses, dumpers which have been very slow with the monsoons, etc.? Where do you expect the first push to come from?
A: Buses have been the main player. While we are seeing slow growth in trucks, there has been good growth in buses. Year-to-date growth has been 26%, which is quite good and adds to last year’s growth of over 30%. So buses are continuing to hit new peaks and we expect demand for buses to continue to improve. That’s the only reason their overall growth is still 1% or more.
Read also | Exclusive limited-time offers on Marriott Bonvoy HDFC Bank Credit Card – Don’t miss out
So, for the rest of the year, we see good prospects as far as trucks are concerned, because there will be good traction in infrastructure. We will see more capital spending by the government, so we should see more growth in construction trucks, because when the construction sector grows, there is also more movement of cement and steel.
We would see good growth in the construction sector. And of course, the home appliances sector and e-commerce are still improving because there is good demand and economies are improving. Rural economies are also improving, monsoons are also good. So we are very positive about that.
For more information, watch the attached video
Disclaimer:
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.