The domestic commercial vehicle market could see a 4 to 7 per cent decline in wholesale volumes in FY25.
According to ICRA, A muted year-on-year growth of 1 per cent in wholesale and 3 per cent in retail sales could be registered in FY2024. The growth seen in H1 FY24 was tapered due to a slowdown in Q4FY24 with a decline of 4 per cent in wholesale due to a slowdown in infrastructure activities ahead of general elections.
“FY22 and FY23 had witnessed a very sharp growth in volume as well as tonnage terms, enlarging the base. The domestic CV volume growth momentum slowed down in FY2024 and is expected to dip in FY25 amid the transient moderation in economic activity in some sectors in the backdrop of the General Elections. The replacement demand would nevertheless remain healthy (primarily due to the ageing fleet) and is expected to support CV volumes in the near to medium term. The long-term growth drivers for the domestic CV industry remain intact, like the sustained push in infrastructure development (evidenced by an increase in the interim budgetary allocation), a steady increase in mining activities, and the improvement in roads/highway connectivity,” said Kinjal Shah, Senior Vice President & Co-Group Head, ICRA Ratings.
ICRA expects the operating profit margins (OPM) of the domestic CV OEMs1 to contract marginally in FY2025 to 8.5 per cent - 9.5 per cent on the back of lower volumes and higher competitive pricing pressures.
The capex and investments for the industry are likely to increase to ₹5,900 crore in FY25 against ₹3,700 crore in FY24 mainly towards product development, technology upgradation and maintenance-related capex.
“Among the various sub-segments within the CV industry, the medium and heavy commercial vehicles (M&HCV)(trucks) volumes in FY2025 are expected to contract by 4-7 per cent YoY, given the high base effect and the impact of the General Elections on infrastructure activities in the first few months. The domestic light commercial vehicles (LCV) (trucks) wholesale volumes are likely to decline by 5-8 per cent in FY25 due to factors such as a high base effect, sustained slowdown in e-commerce, and cannibalisation from e3Ws. The scrappage of older government vehicles is expected to drive replacement demand for the bus segment from state road transport undertakings (SRTUs) in FY25, supporting growth of 2-5 per cent on an overall basis,” mentions a statement from ICRA.