CV sales growth to see double-digit drive next fiscal on infra thrust
The massive infra push is expected to keep commercial vehicle sales in double-digit during the next fiscal, rating agency Crisil said.Author : IANS
The massive infra push is expected to keep commercial vehicle sales in double-digit during the next fiscal, rating agency Crisil said.
Commercial vehicles sales volume is expected to grow 18-23 per cent this fiscal, with the third wave of the Covid-19 pandemic not expected to materially impact the ongoing recovery, it said.
"The industry should sustain the double-digit volume growth next fiscal also on continuing economic recovery and infrastructure spending.
"Operating margin, which is expected to be flat this fiscal because of a material increase in raw material prices, will expand sharply in the next. The consequent higher absolute profits, in turn, will drive an improvement in the credit metrics of CV manufacturers," the ratings agency said.
Besides, it said that the balance sheets of CV manufacturers remain robust.
Crisil Research Associate Director Pushan Sharma said: "Sales volume of medium & heavy commercial vehicles (MHCVs) is expected to grow 37-42 per cent this fiscal because of strong demand from the infrastructure segments such as construction, roads, mining, steel and cement.
"Volume in light commercial vehicles (LCVs) is expected to rise 9-14 per cent on higher demand for last-mile connectivity from sectors such as FMCG and e-commerce - but will be partly offset by supply constraints amid the semiconductor shortage."
Apart from higher volume, the trend of price hikes and increasing share of higher-value MHCVs is expected to continue next fiscal.
After peaking in fiscal 2019, CV volume had fallen sharply by 29 per cent and 21 per cent in fiscals 2020 and 2021, respectively, as the easing of axle norms, high fuel prices, economic contraction, and mobility restrictions due to the Covid pandemic dented demand significantly.
"While this fiscal began with the second wave of the pandemic, CV demand recovered on a low base, growing 28 per cent in the first ten months of this fiscal," the agency said.
"MHCV and LCV sales rebounded with the economy because of demand from infrastructure-related sectors and e-commerce. Improved profitability of fleet operators, with freight rates outpacing diesel price increase by December 2021, compared with April 2021, also helped."
Source : IANS