Indian commercial vehicle sales dip alarming: ICRA

Sales of domestic commercial vehicles – a key indicator of economic activity – dropped 20.2 per cent in 2013-14 due to the economic slowdown and weak consumer sentiment, Indian credit ratings agency ICRA said in a survey.

Almost 6.33 lakh vehicles, including light, medium and heavy commercial vehicles, were sold during FY'14.

''The domestic commercial vehicle industry is currently going through one of its longest down cycles in recent periods. Having witnessed a decline of 2 per cent in FY'13, the industry volumes have contracted by a sharp 20.2 per cent in 2013-14,'' the rating agency said.

The slowing economy and weak consumer sentiment have had a trickle-down impact on demand for LCVs or passenger cars, which shrunk 17.7 per cent during the financial year compared with steady growth in the segment over the past several years.

Demand for medium and heavy commercial vehicles declined 25.2 per cent in FY'14, which was lower than the industry size in FY11.

ICRA, however, believes the industry could see some revival in the second half of 2014-15.

''Given the low base and some replacement demand owing to ageing existing fleets, M&HCV sales are likely to show some recovery from H2 FY'15 onwards. Similarly, driven by certain structurally favourable factors, the LCV segment's growth prospects over the medium term remain intact,'' it said.

The rating agency expects a sales decrease of 6-7 per cent in FY'15.

ICRA observed that despite the muted environment, original equipment manufacturers (OEMs) have sizable expansion plans over the near term.