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Duty cut offers brief relief for CV industry

PMV

If November auto sales figures are anything to go by, the commercial vehicle (CV) industry is in for a deep trouble unless the much-awaited stimulus package from the government comes to the rescue.

However, analysts feel that even this might not bail out the sector considering its fall of over 50% this year.

“If you get a 4% excise duty relief it will probably translate to a price point of Rs50,000 lower on trucks. If the excise cut comes in with interest rate reductions, things may get better for the sector.

But still it’s going to be tough road,” said Abhijit Manohar of Sushil Securities.

“Factors such as freight charges, operating costs and economic concerns are hurting the CV industry. A meagre 4-5% cut in excise duty is not significant enough to help the industry.

But it could offer some respite momentarily,” said Vaishali Jajoo, auto analyst at Angel Stock Broking.

Volumes across all categories—heavy, medium and light—have dropped in November, compared with the same month last year. While heavy and medium vehicles were already seeing fewer takers, light vehicles were in good demand even till September. In fact, between April and September, the light segment grew 15%.

Commercial vehicle sales are largely driven by loans from banks and non-banking finance companies, which are unable to lend below 16-17% interest rates, which has also led to the falling demand.

The Urban Development Ministry has strongly recommended for excise exemption on buses used for public transport. Buses are levied an excise duty of 12% and for trucks it is 14%.

Major players in the commercial vehicle sector, including Tata Motors, Ashok Leyland and VE Commercial Vehicles, were forced to shut down their plants at regular intervals due to inventory build-ups.

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