February 15, 2023
The growth is anticipated to moderate from FY23’s 24-26% growth rate
Wholesale dispatches are expected to report a 16% year-over-year (YoY) growth rate in the third quarter of FY23
Freight rates have remained steady, supporting fleet operator viability
The aggregate operating profit margin of CV Original Equipment Manufacturers (OEMs) is expected to revive to 6-7% in FY23 and improve further in the next fiscal year
India’s commercial vehicle (CV) industry is expected to see a growth rate of 7-10% in the upcoming fiscal year, according to a report from rating agency ICRA. This growth is expected to be led by various factors such as government infrastructure spending, replacement demand, resumption of schools and offices, and e-commerce expansion.
According to the report, this growth is anticipated to moderate from FY23’s 24-26% growth rate. In the third quarter of the current fiscal year, wholesale dispatches are expected to report a 16% YoY growth rate, driven by replacement demand, macroeconomic environment improvement, and underlying industry growth in sectors such as steel, cement, mining, automobiles, and e-commerce.
Freight rates have remained steady, supporting fleet operator viability. The growth trends were broad-based across all three sub-segments of CVs: Medium & Heavy Commercial Vehicles (M&HCV), Light Commercial Vehicles (LCV), and buses in the third quarter of FY22.
Experts said that the domestic CV industry’s sales continue to be driven by multiple tailwinds, such as the replacement of ageing vehicles, pick-up in mining, infrastructure and construction activities, improvement in the overall macroeconomic environment, and healthy fleet utilization levels.
On top of that, the government’s continued emphasis on infrastructure development, exemplified by the increased Capex outlay of INR 10 trillion in the Union Budget 2023-24, is expected to bode well for sustained growth, especially in the heavy truck segment over the near term. The financial performance of the Original Equipment Manufacturers (OEMs) of CVs is expected to improve, led by the benefit of operating leverage and the easing commodity prices. Furthermore, the aggregate operating profit margin of CV OEMs is expected to revive to 6-7% in FY23 and improve further in the next fiscal year.
The experts also mentioned that while CV OEMs have limited plans for capacity expansion in the near term, investments in new product development, electric and other alternative fuel vehicles, and tightening emission norms, among others, would continue.
Source: Economic Times