The Indian commercial vehicle industry is sticking with its optimistic growth projections for the current fiscal given favourable growth drivers despite fuel inflation, chip shortages and geopolitical issues. 

CV industry’s growth in 2021-22 was supported by increased activity in road construction, mining and improved infrastructure spending by the Central and State Governments apart from the boom in the e-commerce sector.  

All leading players such as Tata Motors, Ashok Leyland, VE Commercial Vehicles (VECV) and Daimler India Commercial Vehicles (DICV) reported a significant growth in their truck sales for FY22. 

Buses, trucks

“The CV industry is on a recovery path with the industry selling 6,64,009 units in FY22, which is 26% higher than the 5,26,073 units sold in FY2021. In the truck segment, this was supported by replacement demand, recovery in economic activity and government spending on infrastructure. In the bus segment, growth was supported by the re-opening of schools and offices and the gradual return to normalcy after the pandemic,” said Vinod Aggarwal, MD& CEO of VE Commercial Vehicles told BusinessLine. 

The medium and heavy commercial vehicle sales witnessed strong double-digit growth, driven by pick-up in fleet utilisation levels led by increased economic and infrastructural activities. Tata, Ashok Leyland & VECV reported growth in the range of 42 to 51 per cent in their M&HCV sales. Intermediate commercial vehicle volumes also grew in double digits with a shift to more CNG-powered vehicles, driven by the e-commerce sector. The small commercial vehicle segment reported a single-digit growth as chip shortages caused some production issues. 

“As far as FY22 is concerned, industry performance was fairly positive.  The commercial vehicle industry performed far better than the passenger vehicles industry. This barometer shows that the economy was making its way through while there were operational challenges across sectors, said Satyakam Arya, MD & CEO, DICV,  adding “but, we couldn’t have called this normal. Normalcy is yet to come from a business point of view and this we are expecting sometime in the latter half of FY23. The industry is still tackling constraints and this requires a finite solution. 

Market confidence

The last two quarters of FY22 brought a real change in the business environment—the confidence was back in the market. Business-related to haulage, trailers and tippers saw a slowdown but ICVs were much in business given that this segment is directly linked to consumers. But now, these segments are on an upward trend with resumed infrastructural and logistical activities gaining prominence. 

“We experienced that at DICV as 2021 was a recovery year for us and we marched with great confidence into 2022, said, Arya. 

Semiconductor shortage

But the industry will need to tread with caution due to certain prevailing challenges. The shortage of semiconductors is likely to be a challenge for a few more months. However, increased thrust on infrastructure and rural development by the Central Government is likely to drive demand in the CV industry. But, soaring fuel prices along with a spike in commodity prices may play a spoilsport. 

“Much has already been said about semi-conductor shortages. The industry has been coping by adopting alternative measures and we anticipate this to resolve in the coming quarters. Commodity and diesel prices have gone up significantly in the past few months for various reasons. Given the strong underlying growth in GDP, we expect these costs will be transferred to the end customer through higher freight rates,” said Aggarwal. 

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