Indian commercial vehicle industry reverses decline, to see modest growth in FY25

New Delhi, Sep 2
The domestic commercial vehicle industry is projected to grow at a modest 0-3 per cent in FY25, against the earlier estimated decline of 4-7 per cent, a report showed on Monday.

The current fiscal will be the second consecutive year of growth for the industry after a 1 per cent and 3 per cent YoY growth in wholesale and retail sales, respectively, in FY24, according to credit rating agency ICRA.

This follows a better-than-expected volume growth in four months in current fiscal and expectations of a marginal uptick in demand in the second half.

“Looking ahead, we expect a recovery in volumes in H2 FY25 aided by a back-ended government capex, some pick-up in private capex across manufacturing sectors, and an improvement in rural demand, following visibility around the Kharif crop output and farm cash flows,” said Kinjal Shah, senior vice president and co-group head, corporate ratings, ICRA.

The replacement demand would also remain healthy (primarily due to the ageing fleet) and is expected to support the industry volumes in the medium term, Shah added.

The long-term growth drivers for the domestic CV industry remain intact, like the sustained push in infrastructure development (evidenced by retaining the higher infrastructure capital outlay in the July 2024 budgetary allocation), a steady increase in mining activities, and the improvement in roads/highway connectivity.

The medium and heavy commercial vehicles volumes in FY25 are expected to report a nominal growth of 0-3 per cent YoY, given the high base effect and the impact of the general elections on infrastructure activities in the first few months of the fiscal.

Domestic light commercial vehicles (LCV) wholesale volumes are expected to show a tepid YoY growth in FY25 due to factors such as a high base effect, sustained slowdown in e-commerce and cannibalisation from electric three-wheelers (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 a YoY growth of 8-11 per cent, said the report.