DICV chief takes a dig at discounts

Tags: News
The chief of Daimler India Commercial Vehicles (DICV) has taken a dig at the domestic truck makers, stating that aggressive discounts for new trucks affects the resale value and asset loss to fleet owners. While expressing confidence over India’s progress towards modern trucking industry in the coming years, Marc Llistosella, CEO and managing director of DICV, pointed out that discounts result in pure price-decisions and damage resale value.

“Fleet owners have to endure asset loss of 12-18 per cent on their fleets due to the recent aggressive pricing policies by companies,” he said.

Ashok Leyland had indicated that its realisations were impacted due to discounts hitting very high levels at about Rs 1,15,000 per vehicle during the December quarter even though it took price hikes in October and January. In a recent conference call, C Ramakrishnan, chief financial officer of Tata Motors said, “I am not seeing any particular reduction in January, February compared with a quarter ago. It (discounts) remained intense.” He also said given the market situation and the volume and the overall demand situation, the discount levels were running quite high and he had not seen it reducing in January and February.

Explaining the impact of high discounts further, Llistosella said residual value of a 25-tonner truck of 2011 model has dropped by about 12 per cent to about Rs 11.5 lakh, while residual value of a 22-tonner of 2009 model saw a drop of 17 per cent to Rs 9.5 lakh. “Reduced sales and inventory pile up forced OEMs to curtail production and increase discounts. Discount levels reached a peak of up to 25 per cent by OEMs compared with earlier levels of 3 per cent. High counts destruct established brand values and lead to pure price decisions,” he added.

S P Singh of IFTRT (Indian Foundation of Transport Research and Training) had said that that truckers would remain cautious in purchase of new truck chassis and will like to improve the utilisation of their existing truck fleet because last six months had witnessed a steep drop of 25-30 per cent in resale price of old trucks across the country and hence truckers are unable to generate margin money for purchase of new trucks and have increase in working capital by selling of their old fleet.

balachandarg@mydigitalfc.com

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