Representative image.
Credit: Reuters Photo
Bengaluru: Due to a slowdown in demand for both the medium and heavy commercial vehicle (MHCV) and light commercial vehicle (LCV) segments coupled with the high inventory levels with dealers, the overall commercial vehicle (CV) sales volumes are expected to drop by 3-6% year-on-year (YoY) in the current fiscal, said CareEdge ratings in a report on Wednesday.
This is despite the expectations of pick up in demand after the completion of the second quarter of the current fiscal (FY25). The market is expected to perk with the completion of general elections and a likely uptick in infrastructure projects post-monsoon. Besides that, replacement demand in the wake of mandatory scrapping of older government vehicles is also expected to give a boost.
During the last fiscal, the CV industry faced unexpected challenges, resulting in muted volume growth of (0.7%). This was on account of a fading pent-up demand in the domestic market, sluggish overseas demand and higher vehicle costs due to the transition to Bharat Stage VI emission norms.
The industry had witnessed pre-buying in the March 2023 quarter ahead of the implementation of the BS-VI emission norms. Once the norms came into force in April 2023, vehicle prices rose by up to 5%, leading to a lower demand in the first half of the last fiscal. Further, sales in the second half of the same fiscal year were partially restricted on account of a slowdown in the pace of execution of infrastructure projects due to general elections. Additionally, weak rural demand persisted as rural incomes did not keep pace with rising vehicle prices.
Remarkably, the segment saw a YoY volume growth during FY22 and FY23 of around 30.7% and 28.7% respectively. This surge was fuelled by pent-up demand as the economy recovered from the Covid-19 pandemic. MHCVs and LCVs played pivotal roles in driving overall sales volume within the commercial vehicle sector. Improved industrial and infrastructure demand drove MHCV growth while LCV was boosted by sustained growth in e-commerce.