India’s CV Industry Is Recovering From The Pandemic, But Real Growth Is Still Far Away

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The COVID-19 pandemic has affected almost every other segment in the Indian auto industry, and the commercial vehicle space is no exception. In fact, it was one of the more badly affected segments in the auto sector, however, with the gradual reopening of the economies the CV industry too started to recover. The pandemic led to a good opportunity for expansion in tier 2 cities and tier 3 cities, especially for the Intermediate and Light Commercial Vehicle (I&LCV) segment, which earlier only had the metro cities as their big volume drivers.

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In the first quarter of ongoing Financial Year 2021-22, which ended on June 30, 2021, the commercial vehicle industry’s collective sales stood at 1,05,800 units. Compared to the 31,636 vehicles sold during the same April to June period in 2020, the segment grew by more than three folds. The Medium & Heavy Commercial Vehicle (M&HCV) space grew by over six-folds YoY at 29,158 units, while the LCV segment saw nearly three-fold growth at 76,642 units. Tata Motors continued to lead the chart with 42,825 units being sold in Q1FY2022, closely followed by with 34,034 units for the same period. Ashok Leyland took the third spot with 16,550 commercial vehicles being sold between April and June 2021.

The pandemic led to a good opportunity for expansion in tier 2 cities and tier 3 cities, especially for the Intermediate and Light Commercial Vehicle (I&LCV) segment

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Having said that, we have to consider the fact that the situation was not ideal in both cases, and more so in 2020 when the entire nation was under a lockdown and both production and retail sales were seriously affected. On the other hand, despite the challenges caused by the second wave of the coronavirus pandemic, the industry, especially the cargo segment, was not affected as severely as it was a year ago. And that’s mainly because markets were partially operational, and the lockdowns and restrictions were imposed in selective locations.

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While things are improving, industry experts believe that real growth is still quite far away. Commenting on the CV sector’s performance in Q1FY22, Rajesh Menon, Director General, SIAM had said, “Sales of 1.06 lakh units for the Commercial Vehicle segment were lowest in past 12 years, barring Q1 of FY 20-21.” On the other hand, Ravi Bhatia President and Director JATO India told carandbike, “Some CV recovery that we see is because of the gradual opening of the economy. Real growth will happen once economic growth becomes stronger.” He further added that domestic sales in the CV industry, or otherwise, “have still not reached the pre-COVID levels, and I don’t think it will happen any time soon. So first that needs to happen. Growth is still far away”

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Industry experts says that real growth will happen once economic growth becomes stronger

At the same time, Jalaj Gupta, Business Head, Commercial Vehicles, Mahindra & Mahindra Limited said, “As per the experts and insiders of the Industry, it will take another fiscal year to regain or achieve F19 volumes. We are observing the situation and calibrating as per the ground realities. All depends on the easing of the Covid-19 situation and favourable policy measures. As mentioned earlier, slump in the short run and bounce back in the long run.”

The CV industry’s sales performance during FY2021 gives us a more realistic view of the current market condition. Between April 2020 and March 2021, collective sales from the commercial vehicle industry stood at 568,559 units, about 21 per cent less compared to 717,593 units sold during the same period in FY2020. The passenger commercial vehicle (CV) segment has been hit particularly hard during this period, especially the passenger light commercial vehicle (LCV) space, which fell by nearly 74 per cent. In fact, Mahindra’s Jalaj Gupta says, “Passenger CVs (buses and mini-buses) will take a very long time to recover, and FY22, in all possibility, could be a washout for this sub-segment.”

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The passenger commercial vehicle (CV) segment has been hit particularly hard during the pandemic

To add to the woes of the CV-makers the supply chain issue has also been a matter of concern. Almost every Original Equipment Manufacturer (OEM) has been dealing with the semiconductor shortage that’s hit the entire Automotive Industry globally. This, along with the slump due to the sudden pandemic situation cum lockdown restrictions, and economic downturn and brought down the total industry volumes to around 60 per cent, compared to a couple of years ago.

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However, as we mentioned earlier, the industry is on the recovery path now, and several CV categories are showing growth. Both the ILCV and MHCV segments are on the path of recovery, thanks to the growing demand from Fruit, Agri, Vegetables, E-commerce and other consumption sectors driven by doorstep delivery of essential commodities. Increased investment in infrastructure projects from the government sector is also expected to propel the growth in demand going forward. Industry players believe, CV industry is expected to bounce back with at least 15 per cent growth in FY22, driven by additional demand for commercial vehicles in the fields of vaccine distribution, fuel bowser/tanker, container, and cold chain segments.

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Source link NDTV.com

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