Domestic CV industry to witness 8-10% volume growth in current fiscal year: Report

New Delhi, June 14 (KNN) The commercial vehicle (CV) industry is projected to witness a moderate volume growth of approximately 8-10 percent in the current fiscal year, as the pent-up demand stabilizes, according to a report by Care Edge Ratings.

The report points out that the growth will come amidst increased government thrust on infrastructure spending despite expected muted exports on account of the uncertain global environment amid inflationary concerns.

It is also expected to come on the back of the strong upcycle that the industry is witnessing despite the high base effect.

As per the report, the medium and heavy commercial vehicles (MHCV) segments are anticipated to experience a growth rate of 10-12 percent in FY24. 

Similarly, the light commercial vehicles (LCV) are expected to grow by 6-8 percent, supported by the increasing need for last-mile connectivity, which is fueling the growth of e-commerce activities. 

Arti Roy, Associate Director at CareEdge Ratings said, “ 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.”

The CareEdge Ratings report suggests that the hikes post the implementation of phase II of the Bharat Stage-VI (BS-VI) emission norms will also impact CV demand.

However, the sustenance in demand is aided by healthy replacement demand, increasing freight movement amid increasing government infrastructure spending and rising economic activities, it added.

The leading three players in the CV industry have witnessed a steady improvement in their average operating margins quarter-on-quarter for the past two years. Starting from 3.39 percent in Q1 FY22, the margins have progressively increased to approximately 12 percent in Q4 FY24. 

The report attributes this positive trend to several price hikes implemented throughout the quarters and a reduction in commodity input costs, which have collectively supported the growth in operating margins.  (KNN Bureau)