Commercial vehicle (CV) demand is expected to increase substantially as the Index of Industrial Production (IPP) has grown steadily. Concurrently, financial institutions have cut interest rates.
The latest ICRA report states that growth is likely to be higher in the above 16-tonne category in medium and heavy commercial vehicles (M&HCV) and below 3.5-tonne in the light commercial vehicle (LCV) segment.
M&HCV growth rate could be in the range of 9.5-11.5% over five years, while LCV growth could be marginally higher supported by volumes in the low-tonnage segment.
ICRA also said the improved financing environment has been driving demand in the CV segment. The disbursment level among CV financiers has started increasing gradually and delinquency levels, which rose sharply during the past 4-5 quarters, are showing signs of stability. Interest rates have come down to 11-12% for M&HCV finance.
Sales in the M&HCV sector would remain strong, but growth in the bus segment may not be impressive this fiscal unlike last year when orders from government entities under the Jawaharlal Nehru National Urban Renewal Mission had pushed up bus sales.
With exports improving, demand for containers at ports has picked up. Rates for freight rates originating from the Southern region saw a growth of around 10% that would result in creating new demand in the CV market.
The LCV market grew 40% to 52,447 units during the same period. In both the segments, Tata Motor continues to remain the market leader. The sub 1-tonne segment is likely to witness increased competitive pressure with the launch of M&M’s minitruck ?Maximo?, the ICRA report said.