Commercial vehicle sales may glide into pre-pandemic zone by FY23-end

Industry estimates around 1.02 million commercial vehicles will be sold in the local market by the close of the fiscal year, aided by robust recovery in demand for small commercial vehicles (less than 3.5 tonne) and light & medium duty (LMD) trucks that will breach previous peaks. Total sales of commercial vehicles are expected to fall shy by merely 40,000-45,000 units compared to record sales of 1.06 million units registered in FY19.

Vinod Aggarwal, president, Society of Indian Automobile Manufacturers (SIAM), told ET demand in the commercial vehicle segment has continued to recover sharply in the current fiscal with both small commercial vehicles and light and medium duty trucks expected to post record volumes by March 31.

Girish Wagh, executive director, Tata Motors is equally optimistic. “The tailwinds at this juncture are stronger than the headwinds. There are headwinds in the form of fuel prices and interest rates. But the kind of the work that one has seen in infrastructure and ports has created a strong demand pull,” he said. Year-on-year the industry has also been growing in tonnage terms.

As many as 600,000 SCVs are expected to be sold in the local market in FY23, compared to 581,000 units reported in FY19. In the light & medium duty trucks segment, sales are expected to increase by 6% over the previous peak to 124,000 units, said market trackers.

“With schools re-opening after the pandemic, buses too have started seeing good revival in demand. Sales have more-than-doubled in the first nine months of the fiscal. There is some room for improvement in the heavy-duty trucks segment, where we expect volumes to cross the earlier peak in the upcoming financial year,” said Aggarwal, who is also the managing director at VE Commercial Vehicles (VECV).

Increased government spends on infrastructure development, better availability of financing and replacement demand will support sales of commercial vehicles, especially of heavy-duty trucks, going forward. Replacement sales of commercial vehicles have been muted the last few years with consumers deferring purchases amid economic uncertainties as well as the outbreak of Covid-19, which has been adversely impacting utilisation rates and profitability.The average age of vehicles rose to multi-year highs, resulting in lower fuel efficiency. “Going forward, we expect good replacement demand, especially in MHCVs in Q4 FY23,” said Wagh even as the company as maintains “a close watch on the evolving geopolitical situation, inflation and interest rate risks on both the supply and demand.”

With various growth drivers seen last year being intact, credit rating agency ICRA expects the growth trends to sustain into the next year as well. M&HCV trucks are expected to grow by 15-20% in FY2023 and 10-12% in FY2024, with growth continuing to be supported by traction in construction and mining activities, as well as pent-up replacement demand, it said in a recent report.