The commercial vehicle (CV) market is at its lowest level in the last two years, said Vinod Aggarwal, MD and CEO, VE Commercial Vehicles in an interview with CNBC-TV18.
“Fundamentally for CV, the month-on-month (MoM) sales will be better only because right now the CV market is at the lowest level. Last two to two and a half years, the market has been dropping consistently and it has dropped to a very low level. The figures for July compared to previous July are not comparable. Going forward we are expecting better markets,” he said.
The high commodity cost has led to a massive increase in costs.
“At the same time, since the industry volumes are still low, there is tremendous competition amongst the manufacturers. So discounts are also high, pricing power is not there, so we are not able to pass on the cost increases. However, if the situation improves in the economy, the demand for trucks will go up and that will be the time when the discounts will come down and we should start getting better pricing,” he explained.
Customers are severely impacted because of the fuel hikes. “Diesel prices have gone up by 50 percent in last 15-18 months. As a result of that, their costs have gone up significantly. 50-60 percent of their total operating cost is fuel and if that goes up by 50 percent, it means their freight rates have to go up by almost 25-30 percent. The freight rates haven’t gone up, so they are under tremendous pressure. As a result of that they also negotiate very hard, so the pricing becomes very difficult to extract,” he shared.
The current semiconductor shortage has not impacted the company yet.
“But of late there have been renewed problems because of issues in Malaysia. Therefore it might impact in the coming months but as of now we have been able to manage,” he stated.
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