In its outlook for 2016-17, rating agency ICRA expects the commercial vehicle industry to continue its growth momentum. The medium and heavy commercial vehicle (M&HCV) segment, which has been consistently growing since the past year and a half, is likely to see double-digit growth on the back of replacement demand and improving fleet operator viability.
During 2015-16, the total CV segment saw growth of 12%, with M&HCVs notching 30% growth largely driven by replacement demand, declining diesel prices, pre-buying ahead of BS IV norms and ABS mandatory fitment. According to ICRA, the M&HCV segment is set to register growth of 13-15 % in FY17 aided by an uptick in demand, complete roll-out of BS-IV norms and improving viability of fleet operators.
Buses in growth mode
The bus segment, which accounts for nearly 13% of the total CV volumes, saw a sales recovery in 2015-16, driven by new orders from STUs under the urban renewal programme. As such, the bus market remains favourable in view of demand from SRTUs, initiatives like smart city programmes and demand from the inter-city segment. Viability of private carriers has also improved following a sharp correction in diesel prices. Demand from schools and the staff carrier segment remains stable. ICRA expects the overall bus segment in to grow by 13% 2016-17.
Uptick in LCV trucks
After consistent de-growth over the past three years, LCV (Trucks) have begun to see a recovery. ICRA anticipates replacement-led demand along with expectations of pick-up in demand from consumption-driven sectors. Despite a slowdown, there is likely to be improved viability of LCV fleet owners due to lower diesel prices. LCV (Truck) sales will likely grow by 13% in FY2017 on the back of a low year-ago base and replacement-led demand (i.e. average age of LCV (Trucks) has risen to 5.3 years in FY 2016). Some pre-buying ahead of the complete rollout of BS-IV norms is also likely to aid growth.
Meanwhile, with overall CV exports crossing the 100,000 units mark in 2015-16 and recording 17 percent growth, ICRA expects overseas shipments to grow in FY17 as domestic OEMs are targeting exports not just to the traditional neighbouring countries but also in South East Asian countries and the Middle East. However, it cautions that export growth may not be in double digits this fiscal.
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