Pent-up demand, infra boost to drive commercial vehicle replacement sales next fiscal year

Top industry executives expect demand for light and medium duty trucks (over 3.5 tonne) to increase 25% next fiscal year, with more than 340,000 units expected to be sold by March 2022. Vinod Aggarwal, managing director at VE Commercial Vehicles (VECV), told ET that replacement sales have been very low the last three years as consumers were wary of the pace of economic expansion. The outbreak of the pandemic further hit volumes.

“There is pent-up demand in the market. Investments in infrastructure projects are taking off,” said Aggarwal, who is also the vice-president of industry body Society of Indian Automobile Manufacturers (SIAM).

“With the pandemic expected to be behind us in the coming months, economic activity will rise further. The industry should be in a growth cycle in the next couple of years,” he said.

Despite the second Covid wave, sales of light and medium commercial vehicles (with capacity of more than 3.5 tonnes) increased 72% to 215,000 units in the first nine months of the fiscal. “If we assume that the industry will follow a similar trend and grow by at least 10% in Q4, sales of light and medium duty trucks will be back to pre-Covid levels, notwithstanding the dip in sales of buses,” Aggarwal said.

Volumes in the segment though will still be lower by about 40% compared to peak sales of 557,000 units registered in FY19. Demand for commercial vehicles was hit hard in the past 2-3 fiscal years due to the economic slowdown and a revision in axle-load norms, which permitted carriage of additional payload in existing trucks.