Domestic credit rating agency, ICRA in its latest report has said that Indian commercial vehicle (CV) sales are expected to register a growth of 6-7 percent in the financial year 2017-18, mainly driven by pent-up demand post Goods and Services Tax (GST) and replacement cycle in CVs driving the sales. It also pointed out that the CV sales remained on the slow lane prior to July during the first quarter due to various reasons including pre-buying in fourth quarter of last fiscal and fleet operators deferring new vehicle purchases in view of incoming GST regulation from July 2017.
The rating agency has stated that as a result of these factors, the domestic CV sales contracted by 9.1 percent during the first quarter of FY18 with M&HCV (Truck) sales being impacted the most. It said that the industry will find its momentum back aided by increased thrust on infrastructure and rural sectors in the recent budget, potential implementation of fleet modernisation and higher demand from consumption-driven sectors. It also noted that there has also been considerable improvement in cargo managed by Railways during the same period.
As per the report, within the CV industry, the M&HCV (Truck) segment is likely to register a growth of 2-4 percent during the current fiscal aided by pent-up demand post GST, higher budgetary allocation towards infrastructure and rural sectors. It also said that the segment would also benefit from stricter implementation of regulatory norms especially related to vehicle length (for certain applications) and overloading norms. Besides, ICRA expects LCV (Trucks) segment to grow 14-16 percent in this fiscal. It also expects accordingly, a 10-12 percent drop in bus sales during the current fiscal as compared to the previous year.