CV sales may continue facing headwind on higher inventory

The prolonged slowdown in the auto industry expects few more days of haywire due to rising inventories and uncertainty over BSVI demand forecast. The street expects autos may face more headwinds in commercial vehicles after the implementation of the BS-VI emission norms from April 1, 2020.

The commercial vehicles saw a sharp fall in sales since the start of the 2019. The slow pace of industrial activities, higher costs, and lack of credit availability were major reasons for the slowdown in sales. The implementation of BS VI norms could further increase the sector woes.

In addition to this, the pre buying momentum is not seen as of now in Q2FY20 due to the excess supply (high inventory) and muted demand. The fleet owners expect that BSVI vehicle would be credit neutral as benefits from fuel efficiency and maintenance would largely be offset by higher debt repayments. Further, revised axle load norms and the impact of extended monsoon may also add to the worries in the sector in the near future.

The heavy vehicle manufacturers, namely, Ashok Leyland, Force Motors, SML Isuzu, and Tata Motors, have fallen as much as 21 per cent on an average on year to date basis.