Commercial vehicle industry to record moderate 8% to 10% volume growth this fiscal: Report

The commercial vehicle (CV) industry is likely to record moderate volume growth of around 8-10 per cent this fiscal, with the pent-up demand levelling off, a report said on Tuesday.

The growth will come amid increased government thrust on infrastructure spending despite expected muted exports on account of the uncertain global environment amid inflationary concerns, Care Edge Ratings said in its report. This growth is also expected to come on the back of the strong upcycle that the industry is witnessing despite the high base effect.

Noting that the demand remains strong across all the segments, while the medium and heavy commercial vehicles (MHCV) are expected to grow by 10-12 per cent in FY24, the light commercial vehicles (LCV) are likely to grow by 6-8 per cent aided by last-mile connectivity demand boosting e-commerce activities, it stated.

"With tailwinds like healthy replacement demand, increased freight movement and increasing government infra spending and a continued boom in e-commerce, the CV industry is expected to continue its growth momentum in FY24 with moderate volume growth of 8-10 per cent. Exports are likely to remain subdued for the current fiscal year," said Arti Roy, Associate Director at CareEdge Ratings.

The recent price hikes post the implementation of phase II of the Bharat Stage-VI (BS-VI) emission norms will also impact CV demand, the report said.

However, the sustenance in demand is aided by healthy replacement demand, increasing freight movement amid increasing government infrastructure spending and rising economic activities, according to CareEdge Ratings. During FY22 and FY23, the MHCV segment reported strong year-on-year volume growth of around 53 per cent and 39.7 per cent, respectively, while the LCV segment reported growth of around 21.7 per cent and 23.1 per cent, respectively, it said.

The report also said that the passenger carrier for MHCV and LCV is likely to grow by 14-16 per cent, driven by the mandatory scrapping of government vehicles boosting healthy replacement demand.

The average operating margins for the top three players in the CV industry have been improving gradually quarter-on-quarter over the past two years from 3.39 per cent in Q1 FY22 to around 12 per cent in Q4 FY24, it said, adding that this was supported by multiple price hikes over the quarters and easing commodity input costs.