Indian CV Industry To Grow 2-4% In FY2024: ICRA

The Indian commercial vehicle (CV) industry registered a growth of five per cent in retail sales volumes on a year-on-year (YoY) basis and seven per cent on a sequential basis in September 2023, according to rating agency Icra. This recovery in volumes comes after four months of sluggish demand following the transition to the BS6 2.0 emission norms on 1 April 2023.

The medium and heavy commercial vehicle (M&HCV) segment led the recovery, with retail volumes growing by ten per cent sequentially and by 11 per cent YoY in September 2023. This growth was supported by replacement demand and healthy traction from mining, infrastructure and construction activities. 

The rating agency Icra expects the momentum to be sustained in the coming months, given the conclusion of the seasonally weak monsoon period, construction and mining activities, and increased freight movement during the festive period.

Although the recovery in CV sales volumes in September 2023 is a positive sign for the Indian economy, the M&HCV segment, which is a key indicator of economic activity, is expected to continue to grow in the coming months, driven by infrastructure development and replacement demand.

The light commercial vehicle (LCV) segment also witnessed a sequential growth of five per cent in retail volumes in September 2023. However, on a YoY basis, volumes contracted by two per cent due to the high base effect, a slowdown in e-commerce demand, and some cannibalisation from electric three-wheelers.

Overall, the domestic CV industry has faced mixed dynamics so far in H1 FY2024, with a marginal growth of three per cent YoY in retail volumes and two per cent growth in wholesales. This was brought in by sub-par monsoons, the transition to tightened emission norms, supply chain issues and elevated interest rates on the one hand and infrastructure development and replacement demand supporting volumes on the other hand.

Despite the lacklustre volumes in the first few months of the fiscal year, sales are now gaining traction and are likely to continue as the healthy allocation for capital spending in the Union Budget 2023 to 2024 will continue to support infrastructure development in segments like roads, metros, railways, etc., which augurs well for CV industry volumes. 

Furthermore, the focus on the replacement of old vehicles and on green mobility also bodes well for the sector; hence, Icra expects the domestic CV industry volumes to grow by two to four per cent in FY2024.