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Rating agency CRISIL on Monday said domestic commercial vehicle sales volume is expected to grow by 9-11% in FY24 driven by medium and heavy commercial vehicles and projected economic growth is around 6%.
Besides, increased infrastructure spending in the Union Budget for the next fiscal will support demand.
According to Crisil, this will be the third year in a row in the domestic CV industry.
Of the total domestic CV sales, the light commercial vehicle (LCV) segment is likely to witness a growth of 8-10%, while medium and heavy commercial vehicle (MHCV) sales are expected to register a higher growth of 13-15% in FY24 Is.
“With strong demand prospects, we expect LCV sales volumes to grow by 8-10% in the next fiscal, and surpass pre-pandemic (FY 2019) sales volumes. MHCV sales volumes will continue to grow 13-15% faster than LCVs in the next fiscal, but are expected to exceed pre-pandemic sales volumes in FY2025,” said Anuj Sethi, senior director at CRISIL Ratings .
Domestic CV sales volumes were up 31% year-on-year in 2021-22, while sales volumes are expected to grow by around 27% in the current financial year, as demand picks up on increased activity in the roads, mining, real estate and construction sectors I have jumped. Also focus on last-mile connectivity, the rating agency said.
Apart from higher volumes, a 2-5% increase in realizations as original equipment manufacturers (OEMs) comply with BS VI-Stage II norms, and the benefit of lower commodity prices, especially steel, boosted operating profitability. Will help to improve to the highest level of the year. Estimated 5-6% in this fiscal to 7-7.5% in the next fiscal.
Anil More, Associate Director, Crisil Ratings, said, “Strong balance sheets and healthy liquidity helped offset pressure on profitability in the recent past, ensuring ‘stable’ credit profiles of CV makers.”
He added that expected improvement in operating profitability in the current and next fiscal, and only modest capex (utilisation rate at around 70%) will ensure improvement in key loan metrics and keep the credit profile stable.
According to Mr. More, these loan metrics were affected during the years of the pandemic.