Indian CV Industry In One Of Its Most Progressive Phases

The Indian commercial vehicle industry, often referred to as the backbone of the country’s economy, is witnessing strong growth. If the numbers of the past few months are a testimony to the industry’s performance, one can easily assert that it has come out of the BS-III sales ban and GST to enter a finest phase for its progress.

- Rajesh Rajgor

We spoke to Ms. Binaifer Jehani – Director, CRISIL Research, on various topics like truck fleet utilization, factors likely to boost truck sales, hindrances to the growth of reefer vehicles, the technology disrupting transportation and the potential of the auto components aftermarket in the wake of the growth phase. Ms. Jehani who heads the research function on the automobile, infrastructure, logistics and real estate sectors at CRISIL Research is responsible for overseeing a large team of analysts, offering comprehensive research coverage of these sectors.

Excerpts:

What are your views of the macro and micro scenarios affecting the current sales of trucks and buses in India compared to the previous years?

In fiscal 18, despite being weighed down by multiple factors such as the lingering impact of demonetisation, BSIII to BS-IV transition leading to a price increase and uncertainty during the implementation of GST, the commercial vehicle industry registered a robust growth of 20%. The light commercial vehicle segment grew by 29% buoyed by healthy replacement demand and pick-up in private consumption. Medium and heavy commercial vehicles (MHCVs) too registered a 19% growth aided by stringency on overloading norms, leading to transporters shifting to higher tonnage vehicles. Buses were the only segment to de-grow (by 14%) due to poor demand from STUs, staffas well as the tourism segments.

While freight demand was subdued in fiscal 18, regulatory factors aided demand growth. In the current fiscal, we are seeing a pick-up in freight demand. This is largely aided by public expenditure on infrastructure projects. Awarding of contracts for NHAI peaked during FY18 at around 7400 km. Much of the awarded contracts will come under execution in the current fiscal. Affordable housing and irrigation projects too are contributing to incremental demand for MHCVs.