MUMBAI (NewsRise) -- Shares of top Indian truck makers Tata Motors and Ashok Leyland rose amid hopes of a recovery in demand as dealers cut down inventory and lenders revive credit for vehicle purchases.On Wednesday, Tata Motors, India's biggest commercial vehicle maker, advanced 2.1% in Mumbai to close at its highest in more than a month. Ashok Leyland added 1.4%, its first gain since Dec. 19. The benchmark S&P BSE Sensex closed 0.6% higher.
"Commercial vehicle inventory reduced slightly in December, but continues to be above normal," the Federation of Indian Automobile Dealers Association, or FADA, said, citing the monthly vehicle registration data. Calibrated dispatches of commercial vehicles to dealers along with strong retailing will ensure a return to normal dealer stock levels in January, it said in a statement.
According to a survey by the group, India's commercial vehicle industry has an "above normal" inventory level of 35 to 40 days, as much as the inventory levels of passenger vehicles industry.
FADA expects the fall in fuel prices and resolution of a cash crunch at non-banking financial companies to bring the automobile industry close to double-digit growth by the end of the fiscal year 2019.
Demand for commercial vehicles has been weakening over the past few months as India's economic growth slowed amid a drop in farm incomes. A near meltdown of Infrastructure Leasing & Financial Services, a major non-banking financial company, in October also cast a pall over the automobile industry that largely depends on shadow banking facilities to drive growth. The turn of events at IL&FS resulted in more regulatory curbs for the sector, making it difficult for borrowers to get loans for their vehicle purchases.
Further, sales at many truck makers were higher in the year-earlier period, when some of the state governments started strictly implementing a ban on overloading of vehicles.
"I am continuing to be very bullish. I still feel the market will grow 15%-20% before the year-end," Vinod Dasari, managing director of Ashok Leyland, told local television channel CNBC TV18. "Even if the fourth quarter is lower than last year, in the worst case, the industry will grow by 15%-20%."
Further, he expects Ashok Leyland to expand its sales volumes by up to 30% in the next fiscal year that begins in April ahead of the new emission regulations that come into effect.
In October, India's Supreme Court said vehicles that meet the Euro VI fuel standards would be allowed to be sold in the country starting in April 2020. "World over there is usually anywhere between 25% to 50% jump in buying before the Euro-VI standards set in."
Tata Motors reported an 11% drop in December commercial vehicles dispatches to dealers at 36,180 units, while Ashok Leyland saw a 20% slump in deliveries at 15,493 units. The dispatches declined 5% in November for Tata Motors, while Ashok Leyland suffered a 9% drop.
--Dhanya Ann Thoppil