
The domestic commercial vehicle (CV) industry in India is poised for modest growth in FY2025, with wholesale volumes expected to rise by 0-3% year-on-year (YoY), according to ICRA. This revised projection marks a turnaround from earlier estimates of a 4-7% decline, driven by better-than-anticipated performance in the first four months of FY2025 and a likely demand revival in the latter half of the fiscal year.
Muted Growth Amid Market Challenges
The industry faces mixed signals, as FY2025 is expected to be the second consecutive year of sluggish growth following a 1% rise in wholesale volumes and a 3% uptick in retail sales in FY2024. Factors like a slowdown in infrastructure projects during General Elections and severe heatwaves had initially constrained demand in Q1 FY2025.
However, Kinjal Shah, Senior Vice President & Co-Group Head – Corporate Ratings at ICRA, highlighted a silver lining: “Volumes in Q1 FY2025 outperformed expectations. Recovery is anticipated in H2 FY2025, supported by government-led capital expenditure, increased private investments in manufacturing, and improving rural demand from favorable Kharif crop outcomes and better farm cash flows.”
Replacement demand, stemming from an aging fleet, is also set to play a key role in stabilizing volumes over the medium term.
Segment-Specific Performance and Projections
Medium and Heavy Commercial Vehicles (M&HCVs)
The M&HCV segment, primarily comprising trucks, is projected to achieve a modest growth of 0-3% YoY in FY2025. High base effects and reduced infrastructure activity during the election period are expected to temper growth.
- Tippers: Recorded a 4% YoY decline in Q1 FY2025.
- Haulage Vehicles: Achieved a 3% YoY growth in the same quarter.
- Tractor-Trailers: Posted an impressive 7% YoY growth in Q1 FY2025.
Light Commercial Vehicles (LCVs)
LCV wholesale volumes are forecasted to grow by -1% to 2% YoY in FY2025, weighed down by a high base effect, continued e-commerce slowdown, and competition from electric three-wheelers (e3Ws). The segment saw a 3% YoY decline in FY2024, driven by rising ownership costs, rural economic challenges from deficit rainfall, and an increasing preference for pre-owned vehicles among small fleet operators.
Bus Segment
The bus segment is expected to shine in FY2025, with projected YoY growth of 8-11%. This expansion is attributed to replacement demand spurred by the scrappage of old government vehicles, particularly by state road transport undertakings (SRTUs). Bus segment volumes in FY2024 exceeded pre-COVID levels, signaling a strong recovery.
Transition in Powertrains: Alternative Fuels Make Strides
Conventional diesel engines continue to dominate the Indian CV market, accounting for over 90% of sales in FY2024. However, alternative fuels such as CNG, LNG, and electric vehicles (EVs) are gradually gaining ground, with a 9% market share in FY2024.
- E-Buses: Lead EV penetration at 7%, supported by FAME-II subsidies.
- LCV Goods Segment: Achieved a 1% EV penetration in FY2024.
As the industry transitions towards sustainable mobility, investments in alternative powertrain development are expected to rise.
Profitability and Investments in FY2025
ICRA projects operating profit margins (OPM) for domestic CV manufacturers to remain between 9.5-10.5% in FY2025, slightly below the 10.7% recorded in FY2024. While muted volumes and pricing pressures may constrain margins, favorable raw material costs, better cost management, and an optimized product mix are expected to provide support.
Capital expenditures (capex) for the CV industry are set to increase significantly, with investments estimated at ₹56-58 billion in FY2025 compared to ₹34 billion in FY2024. These funds will prioritize:
- Development of alternative powertrains.
- Technology upgrades.
- Maintenance-related initiatives.
Kinjal Shah further noted, “The industry’s credit metrics are likely to remain stable despite higher capex. Strong operational performance will support debt levels, with Total Debt/OPBITDA projected at 1.2-1.4x by March 2025, down from 1.5x in March 2024.”
Key Trends and Growth Drivers
ICRA identified several long-term growth drivers for the CV industry, including:
- Sustained government focus on infrastructure development, as evidenced by increased budget allocations in July 2024.
- A steady rise in mining activities.
- Improved highway and road connectivity across the country.
Segment-Wise Volume Trends at a Glance
Segment | FY2023 Growth | FY2024 Growth | Q1 FY2025 Growth | FY2025 Projection | Earlier Projection |
M&HCVs | 40% | 0% | 3% | 0-3% | -4% to -7% |
LCVs | 23% | -3% | -1% | -1% to 2% | -5% to -8% |
Buses | 160% | 27% | 28% | 8-11% | 2-5% |
While the Indian commercial vehicle industry navigates a mixed landscape in FY2025, its long-term growth trajectory remains promising. Backed by infrastructure expansion, technological advancements, and a gradual shift to alternative powertrains, the sector is well-positioned for sustained progress.
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