INDIAN AUTOMOBILE INDUSTRY – Commercial Vehicles

Domestic CV industry registered highest ever sales in March 2018

ICRA RESEARCH SERVICES
ICRA Research Services | Monthly Update April 2018

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Anjan Deb Ghosh
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Subrata Ray
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Domestic Volume Growth Trends in March 2018:

Domestic CV sales at 856,453 units grew by 19.9% in FY 2018

➢ M&HCV (Truck) sales expanded by 19.4% on YoY basis on back of stricter implementation of
overloading norms in select states, healthy demand of HCVs and Tipper trucks and low-base
➢ LCV (Trucks) continued to register healthy growth (up 19.5%) on YoY basis driven by favorable
replacement cycle, healthy demand from consumption and express logistics sectors
➢ Bus sales declined by 13.7% in FY 2018 as demand for big buses remains weak because of weak
order inflows from SRTUs

April 11, 2018

ICRA Research Services

Summary

Industry Sales Trends – April 2018

Domestic CV industry reported its highest ever sales in March 2018

The domestic Commercial Vehicle (CV) industry led by truck segment has been on a recovery phase since the beginning of Q2 FY 2018. In FY 2018, the domestic CV sales grew by
19.9% primarily driven by healthy growth in the LCV (Truck) and M&HCV (Truck) segment, while bus sales have contracted sharply on back of weak SRTU orders. Within the CV space,
the M&HCV (Truck) has grown by 19.4% in volume terms aided by pent-up demand post GST implementation, stricter implementation of overloading norms in select states as well as
healthy demand for HCVs (from select industries like car carriers, petroleum products, container traffic). Likewise, the LCV (Truck) segment has also witnessed a strong growth of
29.5% in volume terms driven by replacement cycle, improving financing environment and pick-up rural demand. While truck sales have picked-up sharply, demand for bus has
weakened considerably (down 13.7% in FY 2018) owing to weak orders from both SRTUs and private segment. TML has gained market share in LCV as well as select tonnage
categories in the M&HCV space aided by addressing gaps its product portfolio. Albeit on a low base, M&M has also outperformed the industry in the M&HCV segment in particular.
Despite new model introductions, VECV’s market share in M&HCV Trucks has remained flat, while it has gained share in the bus segment.

Exhibit 1: Trend in Domestic Commercial Vehicle Sales

Industry Volumes FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY2018
M&HCV Trucks 221,776 161,909 195,918 258,488 255,257 304,664
LCV Trucks 476,695 389,434 337,377 334,371 360,765 467,131
Buses 94,740 81,508 81,653 92,845 98060 84658
Total 793,211 632,851 614,948 685,704 714,082 856,453
Growth (%) – YoY
M&HCV Trucks -25.9% -27.0% 21.0% 31.9% (1.2%) 19.4%
LCV Trucks 15.9% -18.3% -13.4% -0.9% 7.9% 29.5%
Buses -4.1% -14.0% 0.2% 13.7% 5.7% (13.7%)
Total -2.0% -20.2% -2.8% 11.5% 4.2% 19.9%
Source: SIAM Data, ICRA research

Outlook: Infrastructure push + fleet replacement policy to drive CV sales in FY 2019; However, growth momentum may not sustain
The increased thrust on infrastructure projects as visible in the recent budget, higher demand from consumption-driven sectors and e-commerce logistic service providers, especially
for LCVs and ICVs will continue to support demand for CVs into FY 2019. However, we expect the growth momentum would see some moderation, especially in the M&HCV segment
owing sizeable capacity addition, especially in tonnage terms during FY 2018. Accordingly, we expect M&HCV Trucks to register a growth of 4-6% in volume terms in FY 2019.
Nonetheless, if Government’s plans (although delayed) on phasing out old diesel vehicles through proposed vehicle modernization program materialize, growth could be higher. ICRA
believes that the LCV segment is on a structural uptrend and has witnessed swift recovery with improvement in liquidity situation. In the near-term, replacement-led demand
(following almost three years of declining sales) and expectation of stronger demand from consumption-driven sectors and E-commerce would remain key growth drivers for the
segment. Accordingly, ICRA expects the LCV (Truck) segment to register a growth of 9-11% in FY 2019. In the bus segment, the growth is expected to recover in FY 2019 aided by
expectation of replacement-led demand following a year of sharp contraction in bus sales. ICRA expects bus sales to grow by 12-14% in FY 2019.

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