The commercial vehicle industry is unlikely to see a bounce back of strong demand in this quarter due to the monsoon fury and associated impact on consumption and infra projects, according to Satyakam Arya, Managing Director & CEO of Daimler India Commercial Vehicles (DICV).
However, the second half of this fiscal year may see healthy growth, and total volumes for the year are likely to reach close to the previous peak witnessed in FY19.
Key reasons
The CV industry ended the June 2023 quarter on a weak note, primarily due to pre-buying ahead of BS6 II norms. Overall CV sales dropped marginally (3 per cent) at 2.17 lakh units in Q1, while medium and heavy commercial vehicle (M&HCV) volumes decreased by 2 per cent at 66,835 units. This came after maintaining steady growth in the post-second wave period.
While pre-buying was a main reason, rising inflation and unseasonal, torrential rains that have disrupted normal lives and agriculture, especially in North India, are cited as causes for poor demand in recent weeks. As of date, at least 6-7 states have been heavily affected by the intensive rain spells and flooding.
“We expect this July-September quarter will be shadowed by the monsoon and this can continue to adversely affect consumption of goods, freight transport, industrial output, the pace of infrastructure development, therefore decelerating overall growth,” Arya told businessline.
Growth prospects
“We anticipate the industry to bounce back in Q3 of FY24 as impending infrastructure projects should catch up speed, basically trying to cover up lost time in the previous two quarters. With the general elections coming up next year we expect some good growth in the last quarter of FY24,” he added.
Infrastructure development will be the major growth driver in the near term. The ₹10- lakh crore capex announced by the Centre will spur demand and create opportunities for new businesses, generating revenue.
It is gathered from industry sources that the Central government has given a directive to spend almost 80% of the budgeted allocation of ₹2.7 lakh crore by this December. Almost ₹1 lakh crore has been spent by mid-June and the balance is expected to be completed on schedule.
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“This is something that we hope and expect to boost the demand for heavy-duty trucks going forward given that India will need more powerful trucks for the vast expanse of highway network we now have. We are foreseeing a high probability of demand for tractor-trailers and, construction and mining trucks in the next few months. India having the second largest road network in the world is a big indicator of a boom coming through for the commercial vehicles industry,” he said.
While urban spending had picked up starting of this year, DICV expects e-commerce to continue its positive momentum in semi-urban and multi-tier markets. This has been creating demand for the small and medium-duty commercial vehicle segments.