Commercial vehicles likely to see 7-10% volume growth in FY24: ICRA

New Delhi, Feb 15 (KNN) Rating agency ICRA on Tuesday said that commercial vehicle industry volumes are expected to grow in the range of 7-10 per cent in the next financial year.

Volume growth will be driven by government infrastructure spending, replacement demand, back-to-school and office scenario, and e-commerce expansion, it said.

The growth will, however, moderate from 24-26 per cent in the current financial year, it added.

“The growth trends were visible in third quarter of the current fiscal, with wholesale dispatches reporting a growth of 16 per cent on a year-on-year basis, supported by replacement demand, improvement in the macroeconomic environment, and healthy traction in the underlying industries such as steel, cement, mining, automobiles, and e-commerce,” Icra pointed out.

The report further pointed out that the growth trends continued in all the three sub-segments — medium & heavy commercial vehicles (M&HCV), light commercial vehicles (LCV), and buses, in the third quarter and nine months ended December 31, 2022.

Speaking about the rise in the domestic CV industry, Icra Assistant Vice President & Sector Head – Corporate Ratings Sruthi Thomas said, “Sales in the domestic CV industry continue to be propelled by multiple tailwinds including replacement of ageing vehicles, pick-up in mining, infrastructure and construction activities, improvement in the overall macroeconomic environment and healthy fleet utilisation levels resulting in improved fleet operator viability.”

Furthermore, the continued thrust of the government on infrastructure development, as evidenced in the increased capex outlay of Rs 10 trillion in the Union Budget for 2023-24, would augur well for sustained growth, especially in the heavy truck segment over the near-term, she added.

Icra also expects an improvement in the financial performance of the CV OEMs, led by the benefit of operating leverage and the easing commodity prices.

“This in turn, will support the gradual improvement in their credit metrics as well. In terms of the investment outlay, while CV OEMs have limited plans for capacity expansion over the near term, investments in new product development, electric and other alternative fuel vehicles, and tightening emission norms, etc. would continue,” Thomas said.  (KNN Bureau)