Factors affecting domestic CV industry

According to a recent note by credit rating agency ICRA, “ the Indian commercial vehicles industry has been facing a slowdown in demand and declining sales over the past two-three quarters primarily due to the economic slowdown and surplus capacity that it is saddled with.” GST implementation, E-way bill implementation, upward revision in axle norms and declining viability of small fleet operators have also been pointed as the factors impacting domestic CV industry.

Shamsher Dewan, Vice President & Sector Head – Corporate Ratings, ICRA, said, “As per our estimates, there has been about 15-20% improvement in turnaround time because of GST. The impact has been more pronounced in a few states such as Kerala, West Bengal, Maharashtra, Madhya Pradesh and Bihar, which were earlier known for high waiting time spent at their inter-state borders.”

Revision in axle load norm and tight liquidity situation has also emerged as critical impediments. “Given the subdued freight rates, low freight availability and increased operating costs, the viability of fleet operators has come under pressure over recent quarters, which has also contributed to lower demand for CVs. ICRA expects that small fleet operators (SFOs) have borne the brunt of the pressure, while performance of larger organized fleet operators indicate expansion in volumes, thereby implying loss for smaller operators. This has also been driven partially by the implementation of GST and E-way bill, wherein smaller operators found it more difficult to pass on the increased compliance costs to its customers,” Dewan added.

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