Commercial Vehicle Sales To Increase 18-23% Next Fiscal, Says CRISIL

Commercial vehicle (CV) sales volume will increase next fiscal by 18 to 23 per cent, rating agency CRISIL said in a press release. The agency also said that the third wave of the Covid-19 pandemic did not have any impact on the ongoing recovery in the commercial vehicle segment. 

“The industry should sustain the double-digit volume growth next fiscal also on continuing economic recovery and infrastructure spending,” said CRISIL. 

The operating margin which is expected to be flat this fiscal year will expand next fiscal, according to CRISIL. Also, the mean revenue will continue to grow next fiscal fuelled by higher volume, multiple price hikes and an increase in the share of higher-value medium and heavy commercial vehicles (MHCVs).

Pushpan Sharma, Associate Director of CRISIL said, “Sales volume of medium & heavy commercial vehicles (MHCVs) is expected to grow 37 to 42 per cent this fiscal because of strong demand from the infrastructure segments such as construction, roads, mining, steel and cement. Volume in light commercial vehicles (LCVs) is expected to rise 9 to 14 per cent on higher demand for last-mile connectivity from sectors such as FMCG and e-commerce — but will be partly offset by supply constraints amid the semiconductor shortage."

"Next fiscal should see sustained growth of 13 to 18 per cent in CV demand because of improved industrial activity and the government’s thrust on infrastructure. But volume, despite high double-digit growth this fiscal and the next, will still be below fiscal 2019 levels," Sharma added.

Notably, after peaking in 2019, the commercial vehicle sales volume had fallen sharply by approximately 29 per cent in 2020 and 21 per cent in 2021, amid Covid-19 pandemic-led economic contraction and mobility restrictions, as well as the surge in fuel prices. However, the commercial vehicle demand grew by 28 per cent this fiscal. 

Naveen Vaidyanathan, Director of CRISIL Ratings says, “The higher revenue growth would be accompanied by a flat operating margin of 4 to 5 per cent this fiscal because of the surge in raw material prices, particularly steel and iron, which together account for about half of the total raw material cost. However, next fiscal, operating margin should rise a healthy 300 basis points to 7 to 8 per cent due to higher volume and easier input prices.”