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Archives

Uncertainty over GST cuts growth of CV industry

10/04/2017 | Author: Autoguide | 0 Comments Back To Home   < Previous News   |   Next news >

The domestic CV industry witnessed growth slowdown

The domestic CV industry witnessed growth slowdown over uncertainty related to effective taxation under the GST regime, according to a recent report of ICRA. The report said that subdued optimism among fleet operators dampened BS-IV related pre-buying during the January-March period.
 
According to ICRA, confluence of factors including waning replacement-led demand, weak cargo availability from industrial sectors and uncertainty related to effective taxation on CV industry under the GST regime were the key factors that contributed to slowdown. The domestic CV volumes took a further hit after November 2016 when GOI's demonetisation move put brakes on the operations of road logistics sector which depends heavily on cash transactions. 
 
With transition to new emission norms (i.e. BS-IV) from April 2017, the industry was expected to witness pre-buying in the last quarter. Although the industry growth recovered in Jan-Feb 2017 but the extent of recovery has been below expectations. 
 
Also, the industry-wide inventory levels have inched up as OEMs had scaled up production in Q4 FY 2017 while sales have been below expectations. As per ICRA, the total inventory of CV OEMs is estimated to have been approximately 74,000 units, which is around 1.3x the average monthly sales.
 
After the ban of BS-III vehicles by the Supreme Court, the companies are contemplating to route unsold inventory of BS-III vehicles to near-by export markets where emission norms have not progressed to Euro IV or equivalent. 
 
According to ICRA, the industry is likely to witness 6-8 per cent growth in FY 2018 aided by higher budgetary allocation towards infrastructure and rural sectors. Also, the potential implementation of scrappage programme will also trigger replacement demand.
 

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