ICRA projects modest growth of 2-4 percent for Indian CV Industry in FY24 amidst shifting outlook

In its latest assessment released on Tuesday, rating agency ICRA indicated a modest volume growth of 2-4 percent in wholesale dispatches, with the industry expected to reach a total volume of 0.98–1 million units in FY24.

Kinjal Shah, Vice President and Co-Group Head of Corporate Ratings at ICRA, shed light on the industry's recent performance, revealing that in September 2023, the Indian CV industry experienced a notable growth of 14.7 percent in domestic wholesale volumes on a sequential basis and an impressive 11.7 percent year-on-year. This surge in wholesale dispatch volumes indicates an upward trajectory as the industry prepares for the seasonally strong festive period.

The industry's recent growth comes after a period of relative sluggishness since the transition to the BS6 2.0 emission norms on April 1, 2023. Shah emphasised that the domestic CV industry reported a year-on-year growth of 2.4 percent in wholesale volumes during H1FY24 (April–September 2023), indicating a gradual recovery in the wake of the regulatory transition.

Looking ahead, ICRA expects the wholesale volumes of the CV industry to remain stable throughout the rest of the year. This projection is supported by factors such as steady freight demand during the upcoming festive period, the ongoing economic recovery, and the government's focus on infrastructure spending, aligning with allocated budgets. Based on these considerations, ICRA anticipates a volume growth of 2-4 percent in wholesale dispatches for the Indian CV industry in FY24, amounting to a range of 0.98–1 million units.

This projection represents a significant departure from earlier estimates made in April, which had anticipated a more robust growth rate of 7–10 percent for the domestic CV industry throughout the year. Offering an update, ICRA noted in July that the Indian commercial vehicle (CV) industry (five major listed CV OEMs) wholesale volumes in July 2023 reported a marginal expansion of 2% on a YoY basis with the gradual correction in availability of BS 6.2-compliant vehicles. However, the volumes contracted by 4% sequentially from June 2023 levels, as is typical during the seasonally weak monsoon period, when construction activity slows down.

"Overall, for 4M FY2024 (April–July 2023), the industry has witnessed a marginal YoY contraction of 2% in wholesale volumes. While the ongoing quarter volumes are expected to remain subdued on account of the monsoon, volumes are expected to revive, subsequently supported by a stable macroeconomic situation, and as construction activity picks up," ICRA noted.