Wed. Oct 5th, 2022


For the context of this article, Indian Medium & Heavy
Commercial Vehicles market comprises all passenger and goods
carriers with a Gross Vehicle Weight (GVW) greater than or equal to
6 tonnes.

Despite facing multiple headwinds from the second and third wave
of CoVID-19, chip shortage, and high raw material prices, the
Indian CV industry performed much better than our previous
estimates and recorded a 46% growth in FY2021 (Financial Year 2021
= April 2021 to March 2022) over FY2020. FY2021 started on a somber
note, the second wave of CoVID-19 forced another round of lockdown
measures and the market fell 65% as compared to the last quarter of
FY2020. The market then grew sequentially over the next 3 quarters
and crossed the 107,000 units mark in Q4 of FY2021, for the first
time since Q4 of FY2018.

The key drivers behind this growth were a spurt in the
construction industry, high fleet utilization levels, and
relatively consistent fuel prices. Several fleet owners reported
fleet utilization levels over 75% across multiple quarters, and
consistency in fuel prices helped nudge the profitability higher.
These factors contributed to a highly conducive environment for the
industry, leading it to cross its pre-pandemic levels. The fall in
new CoVID cases, and the larger than anticipated spurt in
manufacturing industry saw the market beat our forecast by a large
margin in the second half of the financial year.

India’s heavy-duty truck (>15T) segment, the creme de la
creme of the industry, accounted for over 70% of all Medium &
Heavy Commercial Vehicle sales in FY2021. The segment’s sales
gained 61% in terms of volume over FY2020. India’s construction
spending and industrial production expanded by 28% and 12%,
respectively. Tata Motors and Ashok Leyland accounted for over 80%
of the segment’s sales, followed by Eicher Motors. The segment also
saw several new product launches with Tata and Volvo unveiling over
20 new trucks in the second half of FY2021.

The Medium-duty truck (6-15T) segment grew its share in the
industry, from 17% to 30% between FY2015 and FY2020. The rise in
the use of the hub and spoke model in e-commerce post the Goods
& Service Tax (GST) introduction in 2017 triggered an
unprecedented growth phase in the segment. The segment’s growth in
FY2021 was considerably lower than its heavier counterparts as the
relatively newer fleet saw the fleet owners delay their purchase
decisions. Tata Motors & Eicher Motors accounted for over 80%
of the market in FY2021. The segment is gradually transitioning
from diesel to alternative fuels, particularly to natural gas. In
FY2021, several manufacturers launched CNG offerings for medium
duty trucks.

The bus segment, which accounted for 21% of all Medium &
Heavy Commercial Vehicles sales in India in FY2019, accounted for
just 5% in FY2021. The pandemic’s after-effects continued to
pressurize the segment and restricted its recovery. The Indian
market is dominated by city bus segment, which saw a sharp decline
as public transport ridership fell hard. Several large employers in
India operate their own fleet of buses, and with them opting a work
from home model the demand for new buses wasn’t generated. The
segment’s sales grew 24% in FY2021 as the government’s push on
fleet renewal and better public transport infrastructure started to
bear fruit. Tata Motors, Ashok Leyland, and Eicher Motors accounted
for over 87% of all bus sales in FY2021. The bus segment has been
at the forefront of electrification in the Medium & Heavy
Commercial Vehicles industry and attracted several foreign players
such as BYD and Foton to India. Tata Motors & BYD Olectra have
emerged as top bidders for several large public tenders for e-buses
in India in the recent past and are expected to fight for the top
position in the market in the future as well.

What happens next?

In line with an optimistic economic, manufacturing, and
construction outlook, we estimate India’s Medium & Heavy
Commercial Vehicles industry to show double digit growth in 2022 as
well. We estimate the market to follow a similar pattern as to the
last two years and witness a slow-down in the first quarter of the
fiscal and continue growing over the next 3 quarters to reach
109,000 units in Q4 of FY2022. New regulatory and budgetary
announcements’ implementation in the latter half of the financial
year has boosted the demand for trucks in the past couple of
years.

Several manufacturers have reported strong order books as
capacity addition and fleet renewal activities pick up pace in
anticipation of a strong surge in freight movement following the
announcement of infrastructure projects, economic and regulatory
reforms. Going forward we estimate the industry to record high
single digit CAGR till 2026 as a continued effort to promote
manufacturing industry and the infrastructure development push
continue to propel the market higher.




Posted 21 June 2022 by Paritosh Gupta, Sr. Analyst, Medium and Heavy Commercial Vehicle Forecasting, S&P Global Mobility


This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.



Source link

By