In our recent Fuel for Thought Newsletter & Podcast, S&P Global Mobility experts share insights into the emerging t… https://t.co/TJDIWhDBWe
Indian Medium and Heavy Commercial Vehicle Industry: FY2021 in Hindsight
For the context of this article, Indian Medium & Heavy Commercial Vehicles market comprises all passenger and goods carriers with a Gross Vehicle Weight (GVW) greater than or equal to 6 tonnes.
Despite facing multiple headwinds from the second and third wave of CoVID-19, chip shortage, and high raw material prices, the Indian CV industry performed much better than our previous estimates and recorded a 46% growth in FY2021 (Financial Year 2021 = April 2021 to March 2022) over FY2020. FY2021 started on a somber note, the second wave of CoVID-19 forced another round of lockdown measures and the market fell 65% as compared to the last quarter of FY2020. The market then grew sequentially over the next 3 quarters and crossed the 107,000 units mark in Q4 of FY2021, for the first time since Q4 of FY2018.
The key drivers behind this growth were a spurt in the construction industry, high fleet utilization levels, and relatively consistent fuel prices. Several fleet owners reported fleet utilization levels over 75% across multiple quarters, and consistency in fuel prices helped nudge the profitability higher. These factors contributed to a highly conducive environment for the industry, leading it to cross its pre-pandemic levels. The fall in new CoVID cases, and the larger than anticipated spurt in manufacturing industry saw the market beat our forecast by a large margin in the second half of the financial year.
India's heavy-duty truck (>15T) segment, the creme de la creme of the industry, accounted for over 70% of all Medium & Heavy Commercial Vehicle sales in FY2021. The segment's sales gained 61% in terms of volume over FY2020. India's construction spending and industrial production expanded by 28% and 12%, respectively. Tata Motors and Ashok Leyland accounted for over 80% of the segment's sales, followed by Eicher Motors. The segment also saw several new product launches with Tata and Volvo unveiling over 20 new trucks in the second half of FY2021.
The Medium-duty truck (6-15T) segment grew its share in the industry, from 17% to 30% between FY2015 and FY2020. The rise in the use of the hub and spoke model in e-commerce post the Goods & Service Tax (GST) introduction in 2017 triggered an unprecedented growth phase in the segment. The segment's growth in FY2021 was considerably lower than its heavier counterparts as the relatively newer fleet saw the fleet owners delay their purchase decisions. Tata Motors & Eicher Motors accounted for over 80% of the market in FY2021. The segment is gradually transitioning from diesel to alternative fuels, particularly to natural gas. In FY2021, several manufacturers launched CNG offerings for medium duty trucks.
The bus segment, which accounted for 21% of all Medium & Heavy Commercial Vehicles sales in India in FY2019, accounted for just 5% in FY2021. The pandemic's after-effects continued to pressurize the segment and restricted its recovery. The Indian market is dominated by city bus segment, which saw a sharp decline as public transport ridership fell hard. Several large employers in India operate their own fleet of buses, and with them opting a work from home model the demand for new buses wasn't generated. The segment's sales grew 24% in FY2021 as the government's push on fleet renewal and better public transport infrastructure started to bear fruit. Tata Motors, Ashok Leyland, and Eicher Motors accounted for over 87% of all bus sales in FY2021. The bus segment has been at the forefront of electrification in the Medium & Heavy Commercial Vehicles industry and attracted several foreign players such as BYD and Foton to India. Tata Motors & BYD Olectra have emerged as top bidders for several large public tenders for e-buses in India in the recent past and are expected to fight for the top position in the market in the future as well.
What happens next?
In line with an optimistic economic, manufacturing, and construction outlook, we estimate India's Medium & Heavy Commercial Vehicles industry to show double digit growth in 2022 as well. We estimate the market to follow a similar pattern as to the last two years and witness a slow-down in the first quarter of the fiscal and continue growing over the next 3 quarters to reach 109,000 units in Q4 of FY2022. New regulatory and budgetary announcements' implementation in the latter half of the financial year has boosted the demand for trucks in the past couple of years.
Several manufacturers have reported strong order books as capacity addition and fleet renewal activities pick up pace in anticipation of a strong surge in freight movement following the announcement of infrastructure projects, economic and regulatory reforms. Going forward we estimate the industry to record high single digit CAGR till 2026 as a continued effort to promote manufacturing industry and the infrastructure development push continue to propel the market higher.
This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.
- Fuel for Thought: Top 5 Global Automotive Aftermarket Trends
- New EV entries nibbling away at Tesla EV share
- Ethnic Share in US Light Vehicle Market Reaches a Record 33%
- S&P Global Mobility: November auto sales continue previous three-month trend
- When will the heartland embrace electric vehicles?
- Countdown to 2023: Sustained Passenger Vehicle Sales in October.
- Automotive Insights – Canadian EV Information and Analysis Q3 2022
- Countdown to 2023: Price hikes for electrified vehicles outpace combustion counterparts
Ethnic share in the US light vehicle market reached a record 33% in September 2022. In other words, one of every th… https://t.co/10WcC7jVTj
Tesla is the dominant EV sales leader, but they are shedding share as mainstream OEMs arrive. The challenge: Tesla’… https://t.co/GO7pjhUxjP