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Commercial vehicle industry booms in the second quarter of FY2023


By Priya SinghUpdated On: 14-Oct-2022 03:16 PM
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ByPriya SinghPriya Singh |Updated On: 14-Oct-2022 03:16 PM
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After peaking in FY19, CV sales fell sharply by 29% in FY20 and 21% in FY21

After peaking in FY19, CV sales fell sharply by 29% in FY20 and 21% in FY21.

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Despite strong and stable growth in vehicle sales over the past several months, the CV industry, particularly the medium and heavy commercial vehicle segment (M&HCV), is still some time away from the previous peak volume. The commercial vehicle industry's performance is frequently described as a barometer of a country's economic growth and progress.

According to the most recent data from the Society of Indian Automobile Manufacturers (SIAM), commercial vehicle whole sales for the second quarter of FY2023 totalled 2,31,800, the second highest in the last six years, trailing only the peak of 2,57,000 CVs in FY2019.

And, according to data for the second quarter of FY2023, CV sales are improving, although it is still below the peak of FY2019. After peaking in FY19, CV sales fell sharply by 29% in FY20 and 21% in FY21. While the industry saw strong volume growth in the current fiscal year, it will take some time to return to its previous peak due to a massive volume decline caused by a variety of factors.

Following the announcement of revised axle load norms in 2018, the CV industry entered in a slowdown phase. It arrived at a time when volumes were at their highest. The new regulations resulted in at least 15-20% excess capacity, particularly in the M&HCV segment. This was followed by a slow freight scenario, the transition to BS VI, which resulted in higher truck acquisition costs, and the pandemic phase. As a result, the industry had a bumpy ride from H2 of FY19 to H1 of FY21.

According to Gopal Mahadevan, Director & CFO of Ashok Leyland, excess capacity created by axle load norms has been consumed. Volumes in the September quarter were strong due to general economic growth. So, we see steady growth, and if the current trend continues, overall volumes should be close to pre-axle load norms by the end of this fiscal year.

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While the recovery began in FY21, the pandemic's second wave caused some temporary disruption. Despite the rise in truck prices, the recovery in the post-second wave period has been strong. The government's aggressive push to revive the economy through massive infrastructure spending aided the CV industry's recovery, and truck demand has remained strong to this day.

The industry's demand outlook remains favourable in FY23, thanks to the government's strong push for infrastructure spending. While sectors such as e-commerce, FMCG, FMCD, construction, mining, steel, and the cement will continue to drive demand in the M&HCV and I&LCV categories, the SCV (small commercial vehicle) segment is expected to grow due to strong demand from agriculture, dairy, and e-commerce. Also, the reopening of offices and schools, as well as increased activity in the tourism sector, will aid in bus recovery. However, there are concerns about rising fuel prices and high-interest rates.

Demand has grown across regions and different segments. After two years of severe, the industry grew by 26% in FY22 over FY21.

While M&HCV, I&LCV, and passenger segments grew by 104%, 138%, and 341%, respectively, in Q1FY23, the September quarter proved to be healthy for all categories, with improved owner sentiments and economic activity.

During the first quarter of the fiscal year 2019, the M&HCV industry reported a total volume of approximately 89,000 units. Volumes were around 76,000 units in the first quarter of this fiscal year. With strong growth from all major players in the September 2022 quarter, the volume gap between FY19 and this fiscal is expected to close further.

CMV360 always keeps you up to date on the latest government schemes, sales reports, and other relevant news. So, if you're looking for a platform where you can get relevant information about commercial vehicles, this is the place to be. Stay tuned for new updates.

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