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Call to remove additional tax on commercial vehicles

Last updated on: March 14, 2012 19:05 IST

The financial year 2011-12 so far has been characterized by moderation in demand leading. At macro level, the lower industrial production and investments decelerated sharply on account of the 325 bps hike in repo rate in span of 20 months.

Further the slow order finalizing by the government of India also added to concerns, leading to sharp deceleration in India's GDP growth to 6.1% in the quarter ended December 2011. In the process, this was the 7th consecutive quarterly slowdown in GDP.

Despite such sluggish macro economic conditions, the commercial vehicle industry, that comprises of both medium & heavy commercial vehicles (M&HCVs) and light commercial vehicles (LCVs), reported 20% growth to 8.03 lakh vehicles in period April- February 2012.

The growth in CVs were primarily aided by unscathed demand for LCVs that now constitutes over 58% of CV industry compared to 46% in financial year 2007-08.

Further the M&HCVs too, that mirror the GDP growth, reported surprising healthy performance in comparison to the negative macro economic factors. M&HCV consists of trucks and buses over 7.5 tonnes while the LCVs cover the whole gamut of trucks and vans upto 7.5 tonnes.

The LCV industry has consistently posted healthy performance through out the financial year 2011-12 as it remained relatively unscathed by negative macro economic issues.

Its total sales grew by robust 29% to 4.69 lakh vehicles in April 2011 - February 2012 aided by 31% growth in goods carrier division and 12% growth in passenger carrier division.

On the other hand, the M&HCV industry surprised the market with double digit growths for majority of financial year 2011-12, a contrast to severely beaten passenger car industry that is sensitive to interest rate too. In fact, the growth was moderated by 1% fall in bus sales due to high base driven by JNNURM.

On the other hand, truck sales grew by 10% aided by growth across all segments except for over 16.5 to 25 tonnes rigid trucks and mixed demand for tractor trailers though high base effect in March 2012 quarter could partially moderate the growth.

The total M&HCV industry posted 8% growth to 3.33  lakh vehicles in April 2011 - February 2012.

Currently the CV sales especially M&HCV sales are picking momentum in March 2012 quarter due to two factors besides healthy LCV demand i.e. one, fleet operators would increase their purchases in order to take advantage of 50% depreciation allowance under Income tax Act and second, bus segment, which has been sluggish for the past one year, would contribute to the growth due to low base effect.

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