and Light Commercial Vehicle (LCV) segments, as well as high inventory levels with dealers, CARE Ratings has said.
Demand is, however, likely to pick up some pace post in the second half of the current fiscal year with the conclusion of general elections and a likely uptick in infrastructure projects post-monsoon, the agency said.Replacement demand and mandatory scrapping of older government
vehicles are expected to support volumes in FY25.
“The muted growth in FY24 was mainly due to the high base of FY23, the transition to BS VI leading to higher vehicle costs and a slowdown in infrastructure projects amidst elections during the latter part of the year leading to higher inventory with dealers,” the rating agency noted.
The CV sector is expected to exhibit recovery in the second half of FY25 due to anticipated GDP growth, ongoing infrastructure projects and potential interest rate cuts.The CV industry in India witnessed remarkable year-on-year 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.
During FY24, 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 BS VI emission norms.
The industry had witnessed pre-buying in the March 2023 quarter ahead of the implementation of the BS-VI emission norms, which increased vehicle prices by up to five per cent from April 2023, leading to lower demand in H1FY24.
Further, sales in H2FY24 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.
As elections have concluded and the monsoon season subsides by September-October 2024, the second half of FY25 (H2FY25) is anticipated to show signs of recovery in the commercial vehicle (CV) industry.
“Expected interest rate cuts may provide relief in vehicle financing,” the rating agency said. “Replacement demand and mandatory scrapping of older government vehicles are expected to support volumes in FY25. However, despite these positive expectations, the overall CV industry is likely to experience a degrowth of 3-6% in FY25.”