The Indian commercial vehicle (CV) industry, which saw significant growth in FY22 and FY23, is set to face a downturn in FY25, with an anticipated degrowth of 3-6% as per CareEdge Ratings. The industry experienced a robust recovery post-COVID-19, with year-on-year volume growth of around 30.7% and 28.7% respectively. However, FY24 saw muted growth due to a high base from FY23, the transition to BS VI norms leading to higher vehicle costs, and a slowdown in infrastructure projects due to general elections.
The CV sector’s growth in FY24 was restricted to just 0.7%. This was attributed to several factors including:
- High base effect: Following the significant growth in the previous two years.
- BS VI transition: Higher vehicle costs due to new emission norms, leading to pre-buying in Q4 FY23 and reduced demand in H1 FY24.
- Elections and infrastructure slowdown: General elections slowed the pace of infrastructure projects, contributing to higher inventory levels with dealers.
- Weak rural demand: Rural incomes did not keep pace with rising vehicle prices, further dampening sales.
Despite the projected degrowth in FY25, the CV industry is expected to show signs of recovery in the second half of the fiscal year. Key factors contributing to this turnaround include:
- Post-monsoon infrastructure projects: An expected uptick in infrastructure activities following the monsoon season and the conclusion of general elections.
- Replacement demand: Increased demand for replacement vehicles and mandatory scrapping of older government vehicles.
- Potential interest rate cuts: Anticipated reductions in interest rates could ease vehicle financing.
The medium and heavy commercial vehicles (MHCV) and light commercial vehicles (LCV) segments are expected to exhibit contrasting trends in FY25. MHCVs may see improvement in H2FY25 due to infrastructure development, while LCVs could face challenges such as rising vehicle prices, high interest rates, and inflation. Small local transport operators, the primary buyers of LCVs, may defer fleet expansion plans due to financial constraints.
Between FY21 and FY24, the electric vehicle segment within the CV sector saw substantial growth. The transition to EVs is notably visible in the e-bus and LCV categories, driven by lower operational costs and government initiatives promoting cleaner transportation. The government’s PM e-bus Sewa Scheme aims to deploy 10,000 electric buses across 169 cities, which is expected to boost the sector further.
CareEdge Ratings’ Associate Director Arti Roy and Director Hardik Shah highlight that while FY25 may witness a decline in overall sales volume, the industry is poised for a recovery towards the end of the fiscal year. They attribute this to resumed infrastructure projects and potential interest rate cuts, setting the stage for better performance in FY26.
