Pre-election construction lull, high base effect impacts CV wholesales in Feb: ICRA

With the commercial vehicles (CV) industry registering a muted 0.7% decline in wholesale volumes on a YoY basis but a sequential growth of 5.1% in February, the rating agency ICRA claims that its estimates remain unchanged as domestic CV wholesale volumes are expected to grow by 2-5% in FY2024. Further, ICRA expects the domestic CV industry’s sharp upcycle to plateau in FY2025, with a marginal decline of 4-7% in volumes. 

Commenting on the February sales number, Kinjal Shah, Vice President & Co-Group Head, Corporate Ratings, ICRA Limited, stated that the wholesalers during the month was impacted to an extent due to a slowdown in construction activities ahead of the implementation of the model code of conduct for general elections and also as the broader base effect caught up.

The retail volumes, on the other hand, showed 4.8% YoY growth while reporting a marginal 0.9% sequential decline in February 2024. During 11M FY2024 (April 2023-February 2024), the domestic CV wholesale volumes registered a YoY growth of 2.1% as healthy infrastructure spending by the government during H1 FY2024 was offset by a slowing down of construction activity during the rest of the period. 

"Despite the expected slowdown in Q4 FY2024 due to the high base effect of Q4 FY2023 (aided by pre-buying prior to implementation of BS 6.2 norms with effect from April 01, 2023) and the pause in infrastructure activities, ICRA estimates remain unchanged with the domestic CV wholesale volumes expected to grow by 2-5% in FY2024. Further, ICRA expects the domestic CV industry’s sharp upcycle to plateau in FY2025, with a marginal decline of 4-7% in volumes." Shah said in a statement.