C ovid may restrict FY 22 CV sales growth to 23%
The second wave of the Covid pandemic and subsequent restrictions to curb the infections may limit the commercial vehicles' sales growth to 23-28% in 2021-22 compared with earlier estimate of 32-37% rise, according to a report.
Despite this growth, the overall commercial vehicle (CV) volumes are likely to be around 30% lower in this fiscal year compared to the 2019 level, rating agency Crisil said in the report released on Monday.
Volume growth hit a decadal-low last fiscal year. Hit hard by the pandemic, CV sales in India plunged 21% to 568, 559 units in 2020-21 as against 717,539 units in 2019-20, it said.
The CV market saw two consecutive fiscals of steep volume decline, 29% and 21% in 2020 and 2021, respectively, following multiple headwinds such as revised axle norms, BS-VI transition, and the pandemic, according to Crisil.
While a sharp recovery from the lows was on the cards this fiscal year, it will be constrained by a weak first quarter because of the second wave of the pandemic, it said.
According to Crisil, in April, freight rates fell around 20% month-on-month even as diesel prices remained elevated, hurting fleet operators.
With lockdowns becoming widespread in May, freight movement, and consequently the profitability of fleet operators, would remain under pressure, weighing on demand at least in the first quarter, it said.
As lockdowns ease from the second quarter, freight demand and rates could normalise, aiding demand for CVs.
Hetal Gandhi, Director, CRISIL Research, said, "MHCV(medium and heavy commercial vehicles) volume, which was hurt more in the past two fiscals, should see a strong 3540% growth this fiscal, driven by the government's infrastructure thrust and revival in economic activity. "
He further said the light commercial vehicle (LCV) segment could grow 15-20% given continued last-mile demand from ecommerce, consumer staples and the replacement market.