Rising market demand, positive sentiments lift Commercial Vehicle sector

India’s commercial vehicle industry is expected to grow by 20-22 percent in FY23, says analyst firm CareEdge

By T E Narasimhan calendar 24 Nov 2022 Views icon12010 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Rising market demand, positive sentiments lift Commercial Vehicle sector

The commercial vehicle (CV) industry is set to record a volume growth of 20-22 percent in FY23, benefitting from the strong demand and supply cycle while cost pressure remains high, according to a CareEdge report.

It may be noted, post recording the highest volume growth in fiscal 2019 since fiscal 2001, the CV industry went into a downturn, recording a sharp volume de-growth of around 29.7 percent and around 20.4 percent in FY20 and FY21, respectively. 

Reasons include multiple headwinds like the non-banking financial company (NBFC) liquidity crisis, easing of axle norms, increased vehicle cost (BS-VI transition and higher insurance premium), high fuel prices and economic contraction. Making it worse, the Covid-19 pandemic acted as the last nail in the coffin, resulting in the lowest volume in FY20 over the last decade. 

A similar trend was seen in CV exports, which declined by 39.6 percent in FY20 and 16.6 percent in FY21, before recovering by 83.4 percent in FY22. With the receding effect of Covid-19 and recovery in the economy, the CV industry recorded a strong growth of 30.7 percent in volume in FY22 according to CareEdge, a knowledge-based analytical group that aims to provide superior insights based on technology, data analytics and detailed research. The growth momentum continues as the sales volume in H1FY23 grew by 60.2 percent y-o-y with demand across all segments staying strong. 

The CV passenger segment (which contributed 20-22 percent of CV sales volume pre-Covid) was the worst hit during the pandemic, given the work-from-home norms and travel restrictions.  

The bus segment had the steepest fall of 78 percent due to the pandemic. With a rebound in demand with Covid-19 fading and the back-to-office/school trend, demand in the CV passenger segment will support the overall CV volumes in FY23.

While the LCV segment continued to sustain the growth momentum with an increase of 59 percent in volumes on a y-o-y basis in H1FY23, the MHCV segment recorded a substantial growth of 88 percent with improving industrial and infrastructure activities and higher fleet utilisation. Significant volume recovery in the medium and heavy commercial vehicle (MHCV) passenger and light commercial vehicles (LCV) passenger, which grew by 443 percent and 134 percent, respectively, in H1FY23, led to growth traction.  

Overall, on a YTD basis (April-October 2022), the CV segment recorded growth at 52.3 percent y-o-y (top five players). There has been recovery in MHCV, especially in the passenger carrier segment and sustained growth in the MHCV goods carrier segment along with LCV demand augur well in FY23, supporting the volume growth.

Further replacement demand, which contributes 30-35 percent of the volume of sales in the CV industry, was impacted in the past few years due to deferred purchases given the multiple headwinds. However, with a recovery of economic activities, the pent-up replacement demand is likely to boost volumes over the medium term. 

Furthermore, with the implementation of the scrappage policy from April 2023 onwards and with more than 50-55 percent of the existing vehicles above the age of 10 years in MHCV, replacement demand will be buoyant. 

The CV industry is also going through challenges that include higher input prices and fuel costs, increasing interest costs, a slowdown in exports with the global recessionary trend, along with continued inflation dampening the growth momentum. 

CareEdge believes that the high pent-up replacement demand and robust growth in end-user industries like infrastructure and e-commerce will offset headwinds such as high-interest rates and commodity inflation. Profitability for OEMs is also expected to expand with healthy volume sales and improved operating leverage backed by softening of input cost.

With strong tailwinds like spurring economic activities, increased infrastructure spending and a continued boom in e-commerce, the CV industry will continue to maintain its growth momentum in FY23 with volume growth of 20- 22 percent, the report says.  

Exports are likely to remain subdued for the next couple of quarters, although post the monsoon quarter, domestic CV replacement demand is recovering well.

“Bullish demand will translate to higher revenues and overall improved operating leverage will result in improved profitability, supported by price hikes by original equipment manufacturers. During Q1FY23, the industry reported an operating profit of 4.6 percent as compared with an operating loss of 1.6 percent y-o-y. An improvement in margins is expected to continue in Q2FY23 with ease in input prices. The H2FY23 margins are expected to revive moderately as compared with H1FY23, with an expected decline in raw material prices and the planned price hikes by OEMs,” said Arti Roy, Associate Director, CareEdge. 


  • After reporting a volume growth of 30.7 percent in FY22, the commercial vehicle (CV) industry is likely to continue on the same path and post 20-22 percent growth in FY23. Segment-wise, medium, and heavy commercial vehicles
  • (MHCV) are expected to grow by 22-24 percent while light commercial vehicles (LCV) are likely to grow by 18-19 percent.
  • The CV industry recorded a strong volume growth of 60.2 percent y-o-y in H1FY23, while year-to-date (YTD) growth 
  • (April to October 2022) was recorded at 52.3 percent y-o-y (top five players). 
  • The strong growth traction, driven by an overall improvement in economic activities, rapidly growing infrastructure development with private and public capex, higher fleet utilisation levels, the thriving e-commerce sector, and a rebound in replacement demand augurs well for the industry.
  • Growth momentum could be dampened due to headwinds like increasing interest costs, a slowdown in exports, and continuing inflation pressures.


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