Commercial Vehicle Volumes to Decline in FY25

Chennai: Commercial vehicle volumes are likely to decline by 4 to 7 per cent in FY25 due to a slowdown in demand in the first half of the year.

Post a muted 1 per cent growth in wholesale dispatches in FY24, commercial vehicle volumes may decline by 4-7 per cent in FY25 following high base effect and the impact of the general elections on infrastructure activities in H1.

The Medium and Heavy CV (Goods) segment ended FY2024 at 4 per cent growth supported by improved macroeconomic environment, healthy demand from construction and mining sectors and consequent higher freight availability in the early months of the fiscal. However, this was offset by muted demand seen in the latter months. In the fourth quarter, the segment had seen 7 per cent decline.

Light commercial vehicles (LCV) wholesale volumes are likely to decline by 5-8 per cent in FY25 due to factors such as high base effect, a sustained slowdown in e-commerce and cannibalisation from electric three-wheelers. The LCV (Goods) segment reported wholesale dispatches of 142,946 units in Q4 FY2024, witnessing a marginal decline of 3 per cent primarily due to the high base effect. The segment witnessed a YoY volume decline of 3 per cent in FY2024.

However, bus segment volumes gained considerable traction in FY2024, with annual volumes exceeding pre-Covid levels with 104,886 units. Volume growth stood at 23 per cent in Q4 FY2024 and 27 per cent in the entire fiscal of FY2024, supported by the low base. Scrappage of older government vehicles along with improving e-bus penetration is expected to drive replacement demand from SRTUs in FY2025, supporting a growth of 2-5 per cent on an overall basis.

The CV industry will be dominated by vehicles run on conventional fuels, which would primarily be diesel, with a penetration of over 90 per cent. Alternate fuels like CNG, LNG and electric contributed 9 per cent in FY2024. Relatively higher penetration of EVs has been witnessed in buses, followed by LCV goods, with a penetration of 7 per cent and 1 per cent respectively, in FY2024.