Domestic commercial vehicle sales volume may grow 9-11 pc in FY24: Report

The volume of the domestic commercial vehicle sales is expected to grow 9-11 per cent in FY24, driven by medium and heavy commercial vehicles and an estimated economic growth of around 6 per cent, rating agency CRISIL said on Monday (February 13).

Besides, an increased allocation to infrastructure spending in the Union Budget for next fiscal year will support demand, it said. This would be the third consecutive year of growth in the domestic commercial vehicles (CV) industry, according to CRISIL.

Demand for passenger vehicles

Meanwhile, industry body SIAM said that passenger vehicle wholesales rose 17 per cent in January to 2,98,093 units driven by robust offtake of utility vehicles, and this included the fast-growing sports utility vehicles.

Utility vehicle sales rose to 1,49,328 units last month from 1,16,962 units in January last year. Similarly, passenger car dispatches grew to 1,36,931 units from 1,16,962 units. Wholesales of vans also increased to 11,834 units from 10,632 units in the year-ago period. Society of Indian Automobile Manufacturers (SIAM) president Vinod Aggarwal noted that better consumer sentiment is driving the demand for passenger vehicles.

Elaborating further on sales, SIAM director general Rajesh Menon said that passenger vehicles again saw highest ever sales in the month of January and for the first time, it has crossed 3 million sales mark in 10 months, from April to January period.

In the April-January period of this fiscal, the total passenger vehicle dispatches stood at 31,69,788 units, a 32 per cent increase from 24,03,125 units in the same period of last fiscal.

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Two-wheeler sales

Total two-wheeler wholesales in January rose 4 per cent to 11,84,379 units from 11,40,888 units in the same month last year.

“The rate of growth of two-wheelers in the recent year has not kept pace with the growth in the other segments,” Aggarwal stated.

Scooter dispatches grew to 3,76,035 units last month from 3,61,299 units in January 2022. Motorcycle wholesales were higher at 7,71,621 units, as compared with 7,43,804 units in the same month last year. Moped sales rose to 36,723 units from 35,785 units in the year-ago period.

Surge in three-wheelers

Three-wheeler dispatches last month surged over two-fold to 48,903 units from 24,178 units in January 2022. “Three-wheeler segment has gained traction compared to the past two years, though they are still to reach the pre-COVID levels,” Aggarwal said.

The passenger carrier segment witnessed the biggest growth at 37,061 units last month from 16,592 units in the year-ago period. Total wholesales across passenger vehicles, two-wheelers and three-wheelers rose to 15,31,447 units last month from 14,19,354 units in January 2022.

CRISIL Ratings predictions

According to Anuj Sethi, senior director at CRISIL Ratings, with strong demand prospects, they expect LCV sale volumes to grow 8-10 per cent next fiscal, and cross pre-pandemic (fiscal 2019) sale volumes. “MHCV sale volumes will continue to grow faster than LCVs at 13-15 per cent next fiscal, but are expected to exceed pre-pandemic sale volumes in fiscal 2025,” he added.

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Domestic CV sales volume was 31 per cent up year-on-year in 2021-22, while the sales volume in current fiscal is expected to surge around 27 per cent, as demand bounced back on increased activity in the roads, mining, real estate and construction sectors, as well as focus on last-mile connectivity, the rating agency said.

Further, the rating agency said that besides higher volume, a 2-5 per cent increase in realisations as original equipment manufacturers (OEMs) comply with BS VI-Stage II norms, and benefit of lower commodity prices, especially steel, will help improve operating profitability to a four-year high of 7-7.5 per cent next fiscal, from an estimated 5-6 per cent this fiscal.

Strong balance sheets and healthy liquidity helped offset profitability pressures ensuring Stable credit profiles of CV manufacturers in the recent past, said Anil More, associate director at CRISIL Ratings.

The expected improvement in operating profitability in the current and next fiscals, and only modest capital spending needs (given utilization rate at  around 70 per cent) will ensure improvement in the key debt metrics, and keep credit profiles stable, he said.

These debt metrics were impacted during the pandemic years, according to More.