India's CV market hits speed bump as small commercial vehicle sales slow

India's commercial vehicle market saw muted growth in FY24, with weakness in the small commercial vehicle (SCV) segment. SCV sales, a bellwether for consumer spending, fell 4% year-on-year to 514,432 units, dragging overall CV growth to a near standstill with just 1% YoY growth.

In contrast, the bus segment extended its rally for a third year, surging 30% YoY to 109,212 units and surpassing pre-pandemic levels, according to industry data.

Kinjal Shah, Vice President and Co-Group Head - Corporate Ratings, ICRA Limited, stated that in the medium and heavy commercial vehicle (M&HCV) segment, steady macroeconomic environment and replacement demand have driven up demand in the recent past. However, high base effect and a perceived slowdown in the infrastructure activities ahead of the implementation of the model code of conduct for the general elections resulted in some slowdown in volume offtake towards the end of FY2024.

Industry data suggests that medium and heavy commercial vehicles (MHCVs), a barometer of GDP growth also saw muted demand, rising just 6% year on year, to 318,672 units. However, context is key. "The shift in goods CV market towards higher tonnage vehicles indicates the consolidation of cargo, thanks to improved logistics infrastructure, which would gradually bring down the cost of logistics," said Amit Mohan, President of Logistics & Infrastructure at Kotak Mahindra Bank. 

Likewise, the light commercial vehicles (LCVs), which clocked 11% year on year growth in FY24 to 157,466 units, have seen volume contraction in the recent past,  owing to the high base effect catching up, a continued slowdown in e-commerce demand and some cannibalisation from the electric three-wheelers (e3Ws). Further, rural demand and cash flows were impacted by the unseasonal rainfall, which may continue to adversely impact demand, the industry experts point out.