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Commercial vehicles—particularly heavy trucks and buses—are not invoking quite the same confidence as passenger cars are, despite being on a recovery path triggered by a slowly improving economy. Average truck sales over the past six months have dropped nearly 3 times while light commercial vehicles have been cut by half compared to volumes sold during 2018.

Output of new commercial vehicles tend to indicate greater economic activity in the country with impact from changes in demand originating from trade of goods, agriculture/livestock, retail goods movement, as well as infrastructure, commercial and housing construction. Truck sales, in particular, indicate that freight forwarders, transporters, and logistic companies are not only expanding their existing fleets but replenishing and replacing them. Higher replacement levels due to evolving regulations (such as changes in axle load limits or strict restrictions and fines on overloading) may also spur new truck sales.

However, last year’s implementation of Axel Load regime seems to not have led to a huge increase in total volumes which means a concerted replacement drive has not happened. The regime may also have a delayed affect as economic activity—trade, consumption and construction—all pick up substantially. However, entry of new commercial vehicle players and new models (sales of many of which are not reported by PAMA) indicate investors are looking positively at long-term growth prospects, specially considering that roads constitute over 90 percent of all freight transportation in the country and the second phase of CPEC is catered toward building of new infrastructure lines and special economic zones.

To harness demand from latter however, transporters and logistic companies will have to massively modernize their vehicles which would require heavy investment by them in turn. In the past, truck assembling companies have argued that locally assembled trucks were not being used in CPEC projects, most of which were being brought from China. To be fair, road infrastructure already undertaken under CPEC did lead to a pronounced increase in volumetric sales of commercial vehicles—annual truck sales went up nearly 5 times between FY12 and FY18, after which they started to decline due to economic slowdown. However, overall volumes are paltry. At their peak, truck manufacturers sold about 9200 vehicles in the year (FY18) when CPEC projections were manifolds that amount.

Over the coming year, it will be light commercial vehicles, not trucks that will be driving growth. That is also where new assemblers are targeting their investments.

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