Overall Commercial Vehicle Volume To Reach 1Million Units By FY24: Report
The report also expects a growing demand that further leads to rise in operating leverage to boost the profitability of the domestic CV-focused original equipment manufacturers after FY22
According to a report released by the credit ratings agency Fitch Ratings, the overall domestic commercial vehicle (CV) sales volume will witness a significant growth over the next few years and the overall CV volumes is likely to reach around one million units by FY24.
The report also expects a growing demand that further leads to rise in operating leverage to boost the profitability of the domestic CV-focused original equipment manufacturers after FY22, despite elevated production costs.
"A recovery in medium and heavy CVs from multi-year lows, along with sustained growth in light CV categories, will help overall CV volume to reach close to one million units by FY24, the level of the last cyclical peak recorded in FY19," the report stated.
The domestic CV sales volume are expected to grow in the mid-to high-teens over the next few years. The report stated that, "Factors like rapid recovery in India's economic activity after the pandemic shock and the government's planned increase in infrastructure spending will help sustain an improvement in fleet utilization rates, supporting freight economic operators. This should aid the revival of the replacement cycle, notwithstanding pressure from high inflation, and a rise in borrowing rates since the start of the Russia-Ukraine war."
Mentioning the factors that may possibly give a boost for the sales increase, the rating agency believes that the growing loan disbursements by CV financiers will bolster sales over the medium term. It also added that improving earnings visibility for fleet operators, along with manageable asset quality and funding access for lenders, should underpin credit availability.