The small commercial vehicle (SCV) segment — particularly sub-1-tonne mini-trucks such as the Tata Ace — is expected to continue witnessing growth in the near term, riding on a few favourable factors, according to industry representatives and analysts.

“Demand for SCVs is expected to be driven by high replacement demand (especially in the mini-truck segment), steady growth in private consumption and OEM (original equipment manufacturer) aggressiveness,” said Hetal Gandhi, Director, Crisil Research.

Investments by e-commerce logistics companies and strong rural demand are also expected to support growth.

“Throughout the second half of FY19, when heavy-vehicle demand came down, LCV (light commercial vehicle) was growing at 10 per cent. It means there is good demand from the rural market. And I believe rural demand will improve further with the monsoon, which is projected to be good,” said Umesh Revankar, MD and CEO, Shriram Transport Finance Company, a leading lender to the SCV segment.

Monsoon prospects

Last year, the monsoon was predicted to be normal but turned out to be below-normal. In spite of that, SCV demand was good. Hence, with the good monsoon prospects this year, SCV demand is likely to remain strong.

While every segment of the automotive industry slipped into slow or negative growth from the festival season onwards last year, the SCV segment (which comprises sub-1-tonne mini-trucks and above-1-tonne pick-ups) managed to post growth. In this, mini-truck growth outpaced pick-ups, which have been facing volatility over the past few months.

In FY19, total sales of SCVs grew 22 per cent to 5.15 lakh units, crossing the 5-lakh mark for the first time. Of this, mini-trucks grew a whopping 42 per cent, to 2.35 lakh units, while pick-up volumes increased 10 per cent to 2.80 lakh units. Last month, mini-truck sales grew about 10 per cent, while pick-up volumes declined about 10 per cent.

“The outperformance of the mini-truck segment can be attributed to a few factors such as new model launches and a production ramp-up of the Maruti Suzuki Super Carry model. Secondly, under the Smart City initiative, urban local bodies have been inducting small LCVs for garbage collection/waste management,” said Shamsher Dewan, Vice President and Sector Head – Corporate Ratings, ICRA.

In less than three years, the Super Carry has sold 30,000 units. While the first 10,000 sales took around 20 months, the next 20,000 came in a span of just around 10 months.

Lenders upbeat

Lenders to this segment also see a good disbursement opportunity during the first half of this fiscal, as growth in other vehicle categories is likely to be subdued till the festival season.

“SCVs are expected to fare better and sustain moderate single-digit growth till the festival season, after which demand will pick up due to the advancement of purchases before BS-VI norms kick in. The disbursement growth in SCVs will outpace other categories,” said Crisil’s Gandhi.

Related Topics