Commercial vehicle industry volumes to see 7-10 pc growth in FY24: Icra
The commercial vehicle industry volume is expected to grow in the range of 7-10 percent in the next financial year, according to the rating agency, Icra. The volume growth would be on account of government infrastructure spending, replacement demand, back-to-school and office scenarios and e-commerce expansion, it noted.
Icra noted that the growth trends were visible in third quarter of the current fiscal, with wholesale dispatches reporting a growth of 16 percent on a year-on-year basis, supported by replacement demand, improvement in the macroeconomic environment, and healthy traction in the underlying industries such as steel, cement, mining, automobiles, and e-commerce.
Freight rates continued to hold up, which, coupled with healthy freight availability, is supporting fleet operator viability, it noted.
India Commercial Vehicles Market Analysis
The India Commercial Vehicles Market is projected to register a CAGR of 8.06%. Largest Segment by Vehicle Type - Trucks :
Rising demand for pickup trucks, owing to the growing e-commerce and logistics sector is responsible for making light commercial vehicles the largest segment in commercial vehicle sales in India.
Fastest-growing Segment by Vehicle Type - Light Commercial Vans :
The growth in various industries such as e-commerce, construction, and logistics along with looking for fuel-efficient vehicle is driving the growth of light commercial vehicle across the India
Largest Segment by Fuel Type - Diesel : The majority of sales in the commercial vehicle were diesel-fueled CV in India, as diesel is the traditional fuel engine, generates more power, and easy availability is a must in commercial usage.
Fastest-growing Segment by Fuel Type- HEV: Norms by the government, awareness of e-mobility, development in charging infrastructure and incentives is making BEV the fastest growing fuel type in the India commercial vehicle market.
CV Industry hits speed bump in April 2023; road ahead may be smoother: ICRA
Despite the slowdown in wholesale volumes in April 2023, the Indian CV industry is expected to grow by 7%-10% in FY2024 considering the healthy freight availability, and the significant fillip to infrastructure development in the Union Budget 2023-24. The mandatory scrapping of Government vehicles older than 15 years, with effect from April 1, 2023, may provide some support to industry volumes.
Rating agency ICRA expects the Indian commercial vehicle (CV) industry volumes to grow by 7%- 10% in FY2024, supported by replacement demand, pick-up in mining, infrastructure, and construction activities, and overall healthy fleet utilization levels.
This is despite the 5% YoY and 41% sequential contraction in volumes in April 2023 due to expected price increases with the transition to BS6 2.0 and associated pre-buying in March 2023. The growth in FY2024 would follow a year of healthy demand in FY2023, wherein the industry volumes expanded by more than 33%, supported by a favorable base, as well as a healthy pick-up in macroeconomic activity.
The scrappage policy, which was announced in March 2021, has been implemented from April 1, 2023, and is likely to contribute to the growth of new CV sales. It is being implemented in phases, primarily with a view to reducing the carbon footprint. In the first phase, it has been proposed to mandatorily scrap Government vehicles older than 15 years from April 1, 2023, which has the potential to replace ~9 lakh vehicles. The second phase mandates scrapping based on vehicle fitness. Accordingly, heavy commercial vehicles (HCVs) older than 15 years and other vehicles older than 20 years need to undergo a mandatory fitness test from October 1, 2024. Although voluntary in nature, several measures have been proposed to incentivize the scrapping of older vehicles - including a hike in fitness certificates, renewal fees, and levy of green tax on older vehicles, increasing their cost of ownership. Further, on submission of the scrapping certificate, new vehicle purchases would be eligible for discounts from the OEMs, road tax rebates, and registration fee waiver.
Ms. Kinjal Shah, Vice President & Co Group Head, Corporate Ratings, ICRA Limited, said, “The major impact of the Scrappage Policy is expected in the CV segment, especially passenger carriers, as the usage of other vehicles such as two-wheelers, passenger vehicles, etc. beyond 15 years would be limited. ICRA estimates the population of medium and heavy commercial vehicles (M&HCV) older than 15 years at about ~1.1 million units currently, offering significant potential for scrappage. However, given the nature of the usage of such vehicles, the actual scrappage could possibly be lower due to a significant portion of used CVs and older trucks in the overall mix, which are used in hinterlands for short-haul operations by small fleet operators. Even if a proportion of these vehicles gets scrapped, and with mandatory scrapping of the Government vehicles, it can offer a fillip to new vehicle sales by spurring replacement demand.
Moreover, it would drive additional benefits like stimulating modernisation of the fleet in the country, improving fuel efficiencies, and reducing pollution and raw material costs through metal recycling going forward.”
Among the various sub-segments, ICRA expects the M&HCV goods carrier segment to report a growth of 8-10% in FY2024 after closing FY2023 with a robust rise of 40%. The segment volumes would continue to be supported by the stable macroeconomic environment, Government push on infrastructure development, and the consequent higher freight availability, as well as an element of replacement demand.
For the light commercial vehicle (LCV) goods carrier segment, while demand would continue to be led by the increased requirement for last-mile transportation from the e-commerce segment and healthy demand from agriculture and the allied sectors, the growth momentum is likely to moderate to 4%-6% in FY2024 from 23% in FY2023 as the base effect catches up. Volumesdeclined in April 2023, primarily due to the high base effect and on the back of concerns of a possible El Nino condition.
The passenger carrier or bus segment volumes would see a higher growth momentum of 12%- 15% in FY2024, after closing FY2023 with 2.6x volumes in the previous year, with the low base, opening up of offices and educational institutes and replacement demand supporting the growth optically. In FY2024, the segment volumes are also likely to be supported by the mandatory scrappage of Government vehicles older than 15 years.
Overall, ICRA expects the credit profile of CV OEMs to improve steadily going forward due to improvement in profitability supported by operating leverage benefits and no major capital expenditure plans.
The Current Dynamics of Commercial Vehicles Market!
Implementation of vehicle scrappage programs, aggressive investments in infrastructure development and rural development, and drafting of stringent regulatory norms for vehicle length and loading limits, among other parameters, are anticipated to fuel the growth. The resumption of mining activities in some parts of the world, which has triggered the demand for tippers, is also expected to drive growth. The rising levels of disposable income in both developing and developed countries and the continued infrastructure development are also projected to bode well for the growth of the market. The rise in awareness for environmentally sustainable transportation solutions has motivated commercial vehicle manufacturers to develop vehicles that reduce carbon emissions Manufacturers are working on innovating vehicle design, reducing load factors & size, and customizing vehicles according to weight regulations. Infrastructure conditions, driver technique, weather management, and national policy are additional influential factors considered by automakers for developing vehicles. Research & development for manufacturing such vehicles requires a significant investment. Thus, there is a requirement for policy action and investment initiatives to be taken by the government, private and public sectors. Such initiatives will support manufacturers in reducing operational & production costs. Furthermore, the demand for small, medium-, and heavy commercial vehicles has increased for logistics and transportation purposes in association with e-commerce. The logistics market has shifted from just being a service provider to offering customer-centric solutions. Thus, the requirement for commercial vehicles has increased for transportation purposes. Supportive regulatory frameworks and additional incentives from governments have raised the demand for commercial electric vehicles. There has been an increase in electric buses and heavy-duty truck registrations in North America, Europe, and the Asia Pacific regions.
Product Insights
The light commercial vehicles (LCVs) segment accounted for the largest revenue share of over 77% of the overall commercial vehicles market in 2022. The LCVs are considered a cost-effective option for the transportation of goods and passengers. LCVs offer numerous tax benefits and aid in reducing emissions. Moreover, these vehicles are highly dynamic and can be modified for transporting both goods and passengers. They also cost-effective, which is expected to bode well for the growth of the segment. The buses & coaches segment is expected to witness a CAGR of 3.1% from 2023 to 2030. The growth of the segment can be attributed to the increased adoption of buses and coaches in the healthcare and tourism industries. Buses and coaches are the most cost-effective mode of transportation, thereby driving their demand and sales. The growing adoption of electric buses in both developed and developing countries to curb vehicular emissions also bodes well for the growth of the buses and coaches segment.
End-use Insights
The logistics segment accounted for the largest share of over 26% of the overall market in 2022. Continued advancements in global trade and the strengthening of the logistics infrastructure are some of the prime factors that are expected to drive the growth of the logistics segment over the forecast period. The unabated growth of the e-commerce industry also bodes well for the development of the logistics segment. The passenger transportation segment is estimated to register a CAGR exceeding 4.3% from 2023 to 2030. The increase in the adoption of public transportation is anticipated to drive the demand for commercial vehicles. Public transportation is often well-developed in urban areas and individuals find it effective as compared to commuting by car, in terms of time and cost. The accessibility and affordability of passenger transport, coupled with the rising total cost of ownership of personal vehicles in developed and developing economies, are essential contributors to the passenger transportation market.
Regional Insights
North America accounted for the highest market share of 59.61% in 2022. The highly unified supply chain network in North America connects manufacturers and consumers efficiently through multiple transportation modes, including freight rail, air, and express delivery services; maritime transport; & truck transport, thus driving the market growth. Availability of convenient financing options, a strong emphasis by regional governments to ensure in-house automotive production, and aggressive investments in infrastructure development are some of the factors that are expected to contribute to the growth of the regional market. The Asia Pacific regional market is expected to experience significant growth during the forecast period, in line with the growing demand for transportation, warehousing, and unified logistics solutions. The strengthening road infrastructure, easy availability of cost-effective labor and raw materials, and subsequently the rising number of manufacturing facilities, especially in developing economies such as China and India, are some of the factors that are expected to contribute to the regional market growth.
Top 5 Trends for the Commercial Vehicle Industry in 2023 Just for you: the top five trends we foresee having an impact on the success of your dealership’s commercial department.
• Light-duty trucks will play an expanded role in the business world. Continued supply issues will prompt business owners to leverage myriad add-ons, like toppers, unique toolbox configurations, and tonneau options, which can expand the utility of light trucks for delivery and other services. With a pickup’s open vehicle bed, they can manage bigger loads and unevenly shaped freight.
• Medium-duty truck owners will look for multi-purpose solutions. Just as business owners are pressing their light-duty trucks into multiple roles, owners of medium-duty vehicles will also look to products that will enable them to do more with their trucks. Upfit solutions that offer the ability to be easily “switched” out for different purposes should see higher demand.
• Final-mile delivery business will continue to shape demand for specific vehicle types. U.S. commercial vehicle availability has been affected by a number of major issues, including rapid final-mile growth. Even though fewer commercial vehicles were sold in 2022, there was a significant increase in some new vehicle types.
• EVs will dramatically increase market share of final-mile business. Increasingly strict government regulations will propel the adoption of EVs to new heights in 2023. California legislators are dedicated to the adoption of zero-emission vehicles and where California goes, the rest of the country often follows. Although implied concerns over greenhouse gasses seem to be a major motivator in EV development, there are more business-oriented advantages made possible by the industrial internet of things (IIoT). Myriad software programs make it easier than ever to integrate fleet EVs with a business’ value chain.
Electric Mobility In Commercial Vehicle
Segment - Its Future & Benefits The transportation and commodities sectors in the nation are supported by commercial vehicles (CVs). People can satisfy their demands and have their goods delivered from one location to another with the use of CVs. The commercial vehicle sector in India is once again enjoying a resurgence in demand after a painful two years of sales declines. The demand for CVs has risen by 68% as of right now, according to SIAM’s first-half sales numbers for FY2023. The domestic CV sector is now witnessing a revival of demand as a consequence of the government’s considerable infrastructure expenditure, which has led to the sale of M&HCVs and a replacement requirement for passenger-transporting buses. The requirement for smaller buses benefits the LCV category as well, although sales of compact CVs used for last-mile deliveries are substantially increasing because to the booming e-commerce sector. Compared to railroads, trucks have a number of benefits. For instance, trucks may accept goods in lower amounts than rail transit, they can go through rural and hilly areas, and they take less time to load and unload goods than rail. India’s rapid economic development has also played a significant role in driving the truck market. The expansion of industries including infrastructure, real estate, logistics, mining, etc. has been further accelerated by the robust economic growth. Rising earnings, urbanization, the expansion of the rural economy, e-commerce, etc. are further drivers pushing this industry.
The Future of Electric Mobility in Commercial Vehicle
Segment Electric mobility may cause disruptions and structural changes in the automobile sector as it picks up steam in India and other nations. Over the past two years, the car sector has proven to be quite resilient. The decline in worldwide sales that had begun before the COVID-19 epidemic was made worse by the pandemic itself. The sector nevertheless has bright long-term potential despite short-term supply problems. By the middle of this decade, it is anticipated that global passenger car sales would peak. Emerging markets like India will take the lead. In India, the total cost of ownership for electric two- and three-wheelers is projected to be more appealing than for passenger or large commercial vehicles (PVs and HCVs). By 2030, sales of new E2Ws and E3Ws may increase to 50% and 70%, respectively. With delayed electrification, internal combustion engines (ICE) will continue to rule the PV and HCV scene in India. By 2030, sales of new vehicles are anticipated to be dominated by electric PVs and HCVs, with respective percentages of 10 to 15 and 5 to 10 percent.
Electricity, rather than diesel or gasoline, is used to power commercial vehicles. Vans, trucks, excavators, wheel loaders, and tractors are examples of electric vehicles. Electric vehicles can also include agricultural gear like combine harvesters or tractors. They are powered by an on-board battery that receives recharging from the electrical grid.
The electric motor converts electrical energy into mechanical energy, much like in an electric commercial vehicle. One of the essential parts of the electrical system that fuels the power network is the DC-to-DC converter. The driver inverter in these cars converts the battery’s DC energy into the AC energy required to power the vehicle. The largest vehicles on the road are still fuelled by fossil fuels, but the first all-electric light commercial vehicles are already on the road. Light hybrid trucks and excavators utilize both diesel and electric engines. In a few years, long routes for heavy-haul transportation may be run on “e-highways” using electric overhead contact wires.
Fully electric vehicles with zero emissions are advantageous for LCVs used for short-distance, in-town travel. Electric vehicles will have cheaper overall ownership costs than internal combustion engines by 2025. The fact that batteries have a low power compared to their weight, which restricts payload, is one of their most important drawbacks. At least for short-distance travel, battery-powered electric CVs will undoubtedly be the most prevalent of the three technologies after 2030. To begin with, the public and policymakers broadly favour battery-powered electric vehicles as a zero-emissions substitute. As a result, the bulk of worldwide research effort in the passenger and commercial vehicle industries has gone toward upgrading battery technology, which has led to the development of more highenergy- density batteries.
In every market category, India is pushing for electric mobility, and the OEMs are exploring their possibilities for launching electric commercial vehicles, starting with LCVs. Like the Tata Ace electric LCV, which the company just unveiled in India. Similar to this, the market for commercial three-wheelers is exploding with electric vehicles.
Shifting from Diesel to Electric
Commercial Vehicles You cannot simply walk into a dealer at this point in the battery electric vehicle revolution and purchase a battery-electric truck. But because that day isn’t too far off, you could already be considering making such a shift. Compared to purchasing a diesel, there is a lot more to consider when purchasing a BEV, including working with utility companies, site planners, and potential fleet growth. The major issue currently with the introduction of EVs is the electric infrastructure. Small charging stations are required for small CVs, whereas high voltage chargers and greater power are required for large CVs. It’s difficult to plan and put up EV infrastructure. Another issue entirely is the infrastructure. Fitting greatly lowered by using electric trucks.
Employee happiness:
According to several research, fleets using electric trucks have greater employee satisfaction rates. These vehicles provide renewable energy without sacrificing productivity, quickness, or technology. Deploying electric trucks in India may also have a psychological component. The idea of driving clean energy technology might help corporations to retain more employees and infuse productivity in their supply chain process.
Other Advancements in CV Industry Lightweight construction is still a hot issue. Highstrength and ultra-high-strength steels, as well as other materials like aluminum, will help to reduce vehicle weight going forward. This comprises truck mounts as well as cranes, cement mixers, and other construction vehicles. Performance, effectiveness, and fuel usage in transportation have all increased as a result.
Constant change is required in the realm of safety. Since they represent the greatest risk of tipping over, the safety cabins for excavators and cranes are constructed from special materials. To increase active safety, several innovative automatic driving aid systems are already being installed in trucks and buses. Fleet operators that digitally connect all of this data into a single, massive data cloud in the future would have total control while conserving resources like time, money, and energy. In the future, cars will be able to “talk” to one another directly and warn one another of potentially harmful situations.
Data and connectivity:
Connectivity will be essential in the next generation of vehicles. High-speed connection will be included in cars to make driving safer. A high bandwidth connection is therefore required to display 3K to almost 4K video. Many businesses have embraced technology to provide diversified mobility and the digitalization of the key drivers in the automotive sector. Additionally, connectivity will have an impact on data gathered about environmental concerns, parking, traffic, and public transit. The ability to connect will make it easier to collect and process data. In 2022, the tendency is anticipated to be evident in all areas of the auto industry. Devices for tracking vehicles are increasingly widely used. There are several sensors in automobiles. Additionally, the manufacturing industry is putting software to use by demanding the best of software developers. As a result, drivers employ tools and programmes to maintain their automobiles. In case of a driving emergency, the systems are also built to handle them. For instance, the gadgets can help in the case of a car accident by dialling for help and sending position coordinates. The message is clear as a result: The drivers are being saved in novel ways.
Other major advancement is CV industry from last few years is Telematics. The telematics management system, which offers a number of advantages, is one of the most important developments. It provides comprehensive fleet statistics as well as tailored suggestions for improving fleet utilization. Additionally, it increases driver effectiveness generally, ensures the security of the truck and its occupants, remotely monitors vehicle diagnostics in real time to prevent breakdowns, increases vehicle lifespan by keeping track of vehicle health and driving habits, and enhances working conditions and business productivity. Telematics has the potential to significantly influence the future of India’s trucking and logistics business due to its increased emphasis on usability. As a result, over eight years ago, Tata Motors became the first Indian automaker to equip its cars with a telematics system.
Latest Updates of Indian CV Industry
Volvo Trucks India on Friday commenced the commercial trials of liquified natural gas (LNG) powered class leading FM 420 4X2 tractor. Volvo’s LNG powered trucks use diesel cycle to run engine as opposed to the industry practice to use Otto or petrol cycle using spark plugs for combustion. The commercial trial was flagged off from Nagpur in the presence of senior executives from Delhivery, Gas Authority of India Ltd (GAIL), BLNG – providers of LNG and Volvo Trucks executives. The trail aims at offering alternate fuel solutions for demanding long-distance haulage applications. 300th BharatBenz sales and service touch point opened by Daimler India Commercial Vehicles (DICV) in India. In collaboration with Autobahn
Trucking, BharatBenz has added 10 additional BharatBenz touchpoints, increasing its sales and servicing network in western India. The 300th showroom in the BharatBenz network of dealerships in India is situated in Loni, a prime spot along the Pune-Solapur route. Sangli, Baramati, Goa, Solapur, Malegaon, Alephata, Talegaon, Indapur, and Kudal are the other recently opened touchpoints. The average distance between two BharatBenz touchpoints in western Maharashtra has been lowered to 75 kilometres with the most recent retail network expansion.
Tata Motors has introduced the Intra V20, a dualfuel vehicle that operates on gasoline and CNG, in an effort to increase its position in the expanding pickup market. The other pickups unveiled today in Hyderabad included the Yodha 2.0 and Intra V50. The company’s senior executives believe that the launches will aid in its entry into the market for small commercial vehicles. Estimates indicate that Tata Motors presently has 40% of the market.
In September 2021, Ashok Leyland reported car sales of 16,499 units, an increase of 88% from 8787 units a year earlier. Additionally, its yearto- date sales increased by 90% to 79639 units in September 2022 from 41866 units in September
2021. The M&HCV trucks and buses and LCV, which have shown growth of 115 percent, 215 percent, and 124% correspondingly, were the main contributors to the total fast rise. Individually, the H&HCV business improved in September 2022, with total sales of 9927 units for the month as opposed to 4620 units the previous month.
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