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ICRA: Domestic CV sales to grow 6-7% in FY18

ICRA: Domestic CV sales to grow 6-7% in FY18

After suffering contractions in the first quarter of FY18, CV and M&HCV sales are back on track thanks in part to pent up post-GST demand bumps. Tracing the upward trajectory, ICRA estimates domestic CV sales will grow by 6-7% while M&HCV sales will jump 2-4% in FY18.

Between April and June this year, CV sales dropped 9.1% while truck sales dropped more steeply by 32.6%. Multiple factors contributed to the decline:

  • Buyers postponed purchases owing to GST related uncertainty
  • Ambiguity surrounding the implementation of new emission norms curbed the availability of BS-IV compliant vehicles

Beginning in July, Q2 of FY18, sales recovered in part because:  

  • The GST-rollout eased purchase uncertainty
  • Stricter regulations drove up replacement-led demand, especially in  the tractor-trailer segment

Subrata Ray, Senior Group Vice-President, Corporate Sector ratings, ICRA, said: “Post-GST, many underlying economic indicators have started showing initial signs of stabilisation. Besides an uptick in IIP and core industries, many of the other freight generating sectors such as steel, automobiles, port traffic are growing at a healthy pace. There has also been considerable improvement in cargo managed by Railways during the same period.”

As businesses consolidate supply chains by adopting hub-and-spoke models to optimise transportation, there will be increased demand for higher tonnage trucks in the over 35T category. This segment already accounts for 15% of unit sales and 30% of tonnage in the Indian truck market.

Additionally, considering that replacement-led demand has declined for the past three years, it is likely that fleets are clocking in for an upgrade. Soaring demand from e-commerce and consumer-driven sectors will also bolster sales.

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