India’s Online Shoppers Breathe Life Into Commercial Vehicle Demand
Newly-manufactured light commercial vehicles stand in a parking lot before shipping. (Photographer: Andrey Rudakov/Bloomberg)

India’s Online Shoppers Breathe Life Into Commercial Vehicle Demand

Sales of mini-trucks, pick-up vans and other light commercial vehicles are showing an uptick as more Indians are ordering goods online during the pandemic, increasing the need for last-mile delivery logistics.

According to monthly data shared by Tata Motors Ltd., Volvo Eicher Commercial Vehicle Ltd., Ashok Leyland Ltd. and Mahindra & Mahindra Ltd., the segment was the fastest growing in November with an average increase in demand of 11-31% compared to the same time last year. LCV sales have boosted overall volumes of the commercial vehicles makers in the industry—albeit from a lower base.

That came as e-commerce sales during the festive season starting mid-October jumped 65% this year as firms drove a record $8.3 billion in order volumes, beating the industry forecast of $7 billion, according to Redseer. Online sales have also surged during the pandemic as people avoid outdoors.

“In case of LCV, because the deliveries via e-commerce have gone up, coupled with increased last-mile connectivity because of higher consumption demand and a good kharif crop in the rural area has helped the increase in sales of small commercial vehicles,” Hetal Gandhi, director at Crisil Ltd., told BloombergQuint adding that it has even compensated for the overall drop in commercial vehicle sales.

Intermediate light commercial vehicles and LCVs continue to see traction with healthy demand from major end-user industries, Prabhudas Lilladher said in a note too.

Veejay Nakra, chief executive of the automotive division at Mahindra & Mahindra, said they witnessed double-digit growth in pick-ups. “Our small commercial vehicle brands Bolero Pik Up, Supro and Jeeto continue to see strong demand in both rural and urban markets.”

Driving forces at commercial vehicle makers in November:

  • Tata Motors, the market leader, saw total commercial vehicles sales drop 9% year-on-year to 27,982 units. Sales in intermediate and light CV segment, however, rose 11% to 4,025 units.
  • For Ashok Leyland, while overall CV sales rose 3% year-on-year to 3,727 units, it was led by a 31% jump in light commercial vehicle sales to 5,305 units.
  • At Mahindra & Mahindra, while overall CV sales rose by 9%, it was led by increased demand for LCVs of the capacity of less than 2 tonnes and between 2-3.5 tonnes. Both segments saw demand rise 19% to 3,755 units, and 9% to 3,149 units over a year earlier. Sales of vehicles of more than 3.5-tonne capacity fell 31% compared to last year.
  • Volvo Eicher Commercial Vehicles saw overall dispatches increase by 4.4% to 3,237 units compared to last year.
  • For Maruti Suzuki, the light commercial segment was up by 40.3% year-on-year to 3,181 units compared.

Analysts at ICRA and Crisil that BloombergQuint spoke with said while the heavy commercial vehicle segment, or bigger truckers, is still down, tipper and dumper truck segments are witnessing faster recovery. Sales of heavy trucks used to transport goods on highways in the mining and construction sectors remain weak as the economy emerges from the disruptions of the Covid-19 outbreak.

ICRA already estimates a 35-40% decline for the MHCV segment during this fiscal—the lowest in a decade. But the recovery may be underway.

“With the improvement in infrastructure activity, construction projects, and freight volumes, the demand for tippers continues to go up, and will drive the demand among the heavy trucks, followed by tractor-trailer and haulages,” Shamsher Dewan, vice president, corporate sector ratings and who tracks commercial vehicles at ICRA Ltd., said. From freight generation point of view, demand is returning, thanks to increased movement of auto products, cement, steel and petroleum, he said.

Gandhi, however, said the recovery is extremely optical as sales are still lower than what it was in the last quarter of 2019.

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