Commercial vehicle (CV) dispatches are expected to decline by approximately 3% year-over-year in February 2025, while retail volumes are projected to see a steeper drop of 6-8%, according to a recent sector update by Motilal Oswal Financial Services.
The report, published on February 27, paints a challenging picture for the CV segment, which "continues to face a slowdown, with small players struggling and financiers remaining cautious, leading to selective financing that is weighing on overall demand."
Analysts Aniket Mhatre and Amber Shukla note that freight rates remain stagnant, adding further pressure to an already challenging market. However, they highlight that "while demand is expected to stay sluggish, channel partners believe the decline is not as severe as in previous downcycles."
To combat weak demand, original equipment manufacturers (OEMs) are maintaining discounts in the 6-7% range. The report observes that companies are increasingly "offering benefits on AMC (Annual Maintenance Contracts) instead to compensate for the weak demand," suggesting a shift in promotional strategy.
One bright spot in the CV landscape is the tipper segment, which has shown improved demand "driven by increased government spending in most of the regions." Additionally, the report indicates that "agri-related demand is expected to pick up in March."
Fleet utilization currently stands at 75-80%, while inventory levels have risen to 4-5 weeks due to the seasonal impact of anticipated March year-end sales. The analysts observe that "both TTMT (Tata Motors) and AL (Ashok Leyland) are efficiently managing the inventory, which should help them maintain the discount level."
In terms of company-specific performance, Motilal Oswal expects Tata Motors' CV dispatches to dip by 3% year-over-year, while Ashok Leyland and VECV (VE Commercial Vehicles) are projected to grow by 2% and 8% respectively in February 2025.
The Society of Indian Automobile Manufacturers (SIAM) has forecasted a bleak outlook for CVs in FY26 as well, suggesting that the current slowdown may extend into the next fiscal year.
Despite these challenges, the report indicates that the current downturn appears less severe than previous cycles, providing some consolation for industry stakeholders as they navigate through this difficult period.
January Retail Perfomance
The Indian commercial vehicle (CV) sector kicked off 2025 with a varied performance, as January sales figures revealed both pockets of resilience and areas of concern amid shifting economic currents.
Industry analysts attribute this mixed bag to a combination of factors. The lingering effects of national elections held in 2024, which delayed payments and stalled infrastructure projects during the election season, continued to cast a shadow over the sector.