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Indian commercial vehicle sector will see volume growth, experts say

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India’s commercial vehicle (CV) industry is set to grow by economy revives and Covid-19 pandemic fadingaccording to experts.



The CV sector will register mid-to-high teens in the coming years, Fitch Ratings said in a report.

The sector recovered 26 percent in fiscal year 2021-22 after being hit by Covid-19.

During the current fiscal year, CV majors are showing good growth, mainly driven by freight forwarders, while bus sales are also picking up.

According to Emkay Global Financial Services, the CV industry is continuing its upward trend, supported by improved freight availability.

On a year-over-year (year-on-year basis), domestic volumes were up 39 percent for Mahindra and Mahindra, 38 percent for Ashok Leyland, 14 percent for VE Commercial Vehicles Ltd and 0.3 percent for Tata Motors.

A recovery of medium and heavy commercial vehicles (MHCV) from multi-year lows, along with continued growth in the light commercial vehicle (LCV) categories, will help total segment volume reach nearly one million units in FY24 – the level of the last cyclical peak registered in FY19, Fitch Ratings said.

Growth in the resume passenger category, which had a sharper pandemic impact due to travel restrictions and the suspension of commuting to school and office, will also help growth.

However, their share will be below 15 percent of total resume volume, Fitch Ratings added.

A rapid recovery in economic activity in India after the shock of the pandemic and the planned increase in infrastructure spending by the government will help improve fleet utilization rates, supporting the freight economy for operators.

This should promote the revival of the replacement cycle, despite the pressures of high inflation and the rise in borrowing rates since the start of the war between Russia and Ukraine.

According to Fitch Ratings, high fuel rates will also cause older CVs to be replaced by new, more energy-efficient vehicles, including those powered by compressed natural gas in the smaller categories.

Improving revenue visibility for fleet managers, along with manageable asset quality and access to finance for lenders, should support credit availability, according to Fitch Ratings.

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