Although Icra believes growth would be optically better in FY2022 at 24-27%, the recovery to industry volumes of even FY 2017 levels would remain some time away
The light commercial vehicle segment though is expected to see some demand recovery in the coming months from rural and semi urban areas
NEW DELHI: Commercial vehicle sales in domestic market is expected to decline in the range of 25-28% and touch a decade-low in FY21 due to the covid-19 induced economic slowdown, ratings agency Icra said on Thursday.
Manufacturers of trucks and buses were already reeling under the impact of a sharp drop in volumes due to the dual impact of economic slowdown and revision in load carrying norms before the pandemic further crippled their businesses.
“The domestic commercial vehicle industry volumes are expected to contract further by 25-28% in FY2021, which would bring industry volumes to the lowest levels in more than a decade. Although ICRA believes growth would be optically better in FY2022 at 24-27%, the recovery to industry volumes of even FY 2017 levels would remain some time away," said the agency in a note.
As a result, financial performance of commercial vehicle manufacturers like Tata Motors Ltd, Ashok Leyland Ltd and Volvo Eicher Commercial Vehicle Ltd will remain under pressure and credit profile of fleet owners will further deteriorate.
The light commercial vehicle segment though is expected to see some demand recovery in the coming months from rural and semi urban areas as a result of a good summer crop, decent monsoon and lower cases of covid-19 infection.
According to Shamsher Dewan, vice-president, Icra, the challenges related to freight availability and stress on fleet operators have compounded significantly over the past three-four months on account of the pandemic and lockdown imposed to curb it.
“Accordingly, notwithstanding the sharp contraction of 47% in FY 2020, the segment volumes are expected to contract further by 35-40% during the current fiscal. Recovery over the medium-term hinges on macroeconomic revival, as well as pickup in construction and mining activity. Sustained and meaningful pick-up in the economy and infrastructure projects remains critical for the industry fortunes to reverse," added Dewan.