Home / News / India /  Commercial vehicles likely to see 22% volume growth in FY23: Report

New Delhi: The commercial vehicle (CV) industry is likely to post 20-22% volume growth in FY23, continuing the traction seen in the previous year, CareEdge Ratings has said in a report.

The CV industry recorded a volume growth of 30.7% in FY22. It logged a strong growth of 60.2% y-o-y in the first half of FY23, while year-to-date (YTD) growth (April to October 2022) was recorded at 52.3% y-o-y for top five players.

“Segment-wise, medium, and heavy commercial vehicles (MHCV) are expected to grow by 22-24% while light commercial vehicles (LCV) are likely to grow by 18-19%," it said.

The strong growth traction, driven by an overall improvement in economic activities, rapidly growing infrastructure development with private and public capex, higher fleet utilisation levels, the thriving ecommerce sector, and a rebound in replacement demand augurs well for the industry, the CareEdge Ratings analysis said.

“The CV industry is also going through challenges that include higher input prices and fuel costs, increasing interest costs, a slowdown in exports with the global recessionary trend, along with continued inflation dampening the growth momentum," the report said.

CareEdge believes that the high pent-up replacement demand and robust growth in end-user industries like infrastructure and e-commerce would offset headwinds such as high-interest rates and commodity inflation. Profitability for OEMs is also expected to expand with healthy volume sales and improved operating leverage backed by softening of input cost.

The rating agency noted that with strong tailwinds like spurring economic activities, increased infrastructure spending and a continued boom in e-commerce, the CV industry will continue to maintain its growth momentum in FY23 with volume growth of 20- 22%.

Exports are likely to remain subdued for the next couple of quarters, although post the monsoon quarter, domestic CV replacement demand is recovering well, according to CareEdge.

“Bullish demand would translate to higher revenues and overall improved operating leverage would result in improved profitability, supported by price hikes by original equipment manufacturers. During Q1FY23, the industry reported an operating profit of 4.6% as compared with an operating loss of 1.6% y-o-y. An improvement in margins is expected to continue in Q2FY23 with ease in input prices," said Arti Roy, Associate Director, CareEdge.

“The H2FY23 margins are expected to revive moderately as compared with H1FY23, with an expected decline in raw material prices and the planned price hikes by OEMs," she added.

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