The month of October was perhaps the only bright spot for passenger vehicle makers in the last 12 months. However, commercial vehicle sales continue to fall, despite recent interventions by the government. Overall commercial vehicle sales fell 23 percent in October, and medium and heavy trucks sales dropped by 50 percent. With CV makers staring at a tough road ahead, Vinod Aggarwal, MD and CEO of Volvo Eicher Commercial Vehicles says that it is time to consider reducing GST rates.
CNBC-TV18 caught up with Aggarwal at VECV’s Gurgaon headquarters. The industry veteran explained that the demand for commercial vehicles continues to fall as a result of the economic slowdown and tepid sentiment. VECV has slashed production by at least 50 percent compared to last year. The company like other CV manufactures is under pressure to cut production due to lack of demand and the need to clear BSIV stock before 1
st of April, 2020.
Reacting to a question about the possibility of demand revival, Aggarwal said that the biggest driver will be government spending on infrastructure and housing projects. “Government should still think of coming out with some fiscal measures. We should not forget that with BSVI prices of vehicles will go up. Coupled with the current economic situation, if the GST continues at this rate then we may see more pain in the first six months of next year”. When asked about what fiscal measures the government could take, he said, “Maybe some cut in GST rate which should coincide with BSVI implementation, so that some cost increase gets compensated”.
VECV stands ready to roll out BSVI vehicles but a lot will also depend on fuel availability. Aggarwal explained that OEM’s would have to start selling BSVI stock from February or March in order to make the transition before the 1
st April deadline and the non-availability of BSVI fuel may impact plans. He said, “If BSIV fuel with more sulphur content is put into a BSVI truck, then filters may choke and the vehicle may even come to standstill and if fuel is not available all over the country from even 1 st April onwards then the situation will be very serious”.
Aggarwal made it clear that VECV was not looking at entering the scrapping business at this point, but hopes that the government would formulate a policy which incentivizes vehicle scrapping. He said, “There has to be an incentive for a customer to scrap and not a disincentive where he can pay some money in terms of higher fees and continue to run the vehicle. If you continue to run more than 12-year-old vehicles then there will be no help to industry or environment”.
Commenting on discounting levels in the CV sector, Aggarwal said that big fleet operators are able to drive a hard bargain because of muted demand but VECV will ensure there is no fire sale. “Till the time the capacity is high these discounts will continue but at the end of the day it’s hurting everyone, these levels are not sustainable”, he said.