With a slowdown in the economy, 50% capital utilization and striking truckers, despite a reduction in depreciation and CENVAT, it has been an unpleasant beginning to the year for commercial vehicle (CV) manufacturers Tata Motors and Ashok Leyland, which continue to register negative growth in domestic sales. Industry leader Tata Motors saw total CV sales drop by nearly half selling 17,373 units in January 2009, a 43.10% decline from January 2008 when 30,530 units were sold. Ashok Leyland took an even bigger hit with sales declining from 9,112 units in January 2008 to 2,444 in January 2009, a 73.20% fall.

A Crisil Study shows that falling demand for Medium and Heavy Commercial Vehicles (MHCV) is mainly linked to the overall slowdown in industrial production. Transporters have deferred purchases despite stable freight rates, with rising cost of ownership impacting their profitability amidst concerns over freight demand sustainability. Tata Motors saw sales decline by 62.83%, selling only 5,811 units in January 2009 over the 15,633 units sold during the same period last year. Even though it is only the second biggest manufacturer in the segment, Ashok Leyland is particularly exposed to the MHCV segment, as it contributes more than 85 per cent to its total revenues. While in January 2008, 8,341 units were sold, January 2009 saw a 76.30% drop in sales as the company sold only 1,977 units.

Passenger MHCVs have been making valiant efforts to push demand because of states placing orders for new vehicles as they phase out old ones, but it is the goods MHCVs that drive the segment and they have been crippled by the total lack of economic activity and industrial production.

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