Domestic CV industry to witness a decline of 4-7% in wholesale volumes in FY2025 on a high base: ICRA | Autocar Professional


Rating agency ICRA anticipates the domestic commercial vehicle industry’s uptrend to halt in fiscal year 2025, projecting a 4-7% decline in wholesale volumes. This forecast follows a muted year-over-year growth of 1% in wholesale and 3% in retail sales for fiscal year 2024. 

Robust growth in the first half of FY2024 was offset by a slower fourth quarter, which experienced a 4% drop in wholesale volumes. Factors contributing to this slowdown include the implementation of the Model Code of Conduct and a perceived deceleration in infrastructure activities ahead of the General Elections.

Kinjal Shah, Senior Vice President and Co-Group Head, ICRA Ratings said: “FY2022 and FY2023 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 FY2025 amid the transient moderation in economic activity in some sectors in the backdrop of the General Elections.” 

Shah further added that the replacement demand would nevertheless remain healthy, primarily due to the aging 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.” 

ICRA anticipates that the operating profit margins (OPM) of domestic commercial vehicle (CV) original equipment manufacturers (OEMs) will decrease to 8.5%-9.5% in FY2025, due to lower volumes and increased competitive pricing pressures. In FY2024, OPM improved by 250-300 basis points, driven by the highest industry volumes in five years, reduced discounting by OEMs, and favorable commodity prices. Looking ahead, industry capital expenditures (capex) and investments are expected to rise to approximately Rs 59 billion in FY2025, up from around Rs 37 billion in FY2024, primarily for product development, technology upgrades, and maintenance-related capex.

Within the CV industry, medium and heavy commercial vehicle (M&HCV) (trucks) volumes are forecasted to decline by 4-7% year-over-year (YoY) in FY2025, influenced by a high base effect and the General Elections’ impact on infrastructure activities in the early months.

The segment grew by 4% YoY in FY2024, benefiting from an improved macroeconomic environment and increased freight availability early in the fiscal year, which offset the muted demand in later months. In this segment, the haulage sub-segment experienced a 6% YoY volume decline in FY2024, while the tipper sub-segment volumes remained steady YoY. Conversely, the tractor-trailers sub-segment saw a significant 19% YoY volume growth in FY2024.

Domestic light commercial vehicle (LCV) (trucks) wholesale volumes are projected to decrease by 5-8% in FY2025, due to a high base effect, a continued slowdown in e-commerce, and competition from electric three-wheelers (e3Ws). The segment saw a slight 3% YoY decline in FY2024, affected by these factors and a deficit in rainfall impacting the rural economy.

The scrappage of older government vehicles is expected to boost replacement demand for the bus segment from state road transport undertakings (SRTUs) in FY2025, leading to overall growth of 2-5%. The segment gained significant traction in FY2024, surpassing pre-COVID levels.

Commenting on the alternate fuel penetration in the domestic CV industry, Shah further added: “In terms of powertrain mix, conventional fuels (primarily diesel) continued to dominate the domestic CV industry with a penetration of over 90%, with alternate fuels (CNG, LNG and electric) contributing 9% in FY2024. Relatively higher penetration of EVs was seen in buses, followed by LCV goods, with a penetration of 7% and 1%, respectively, in FY2024.”

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