M&HCV, bus sales shift up in Q1; top 4 players register 7.2 growth | Auto

Wagh added that the M&HCV segment led the growth with around a 10 per cent rise in Q1FY25 sales volumes versus Q1FY24.

While heavy CV demand held up well, market sentiment remained positive in the medium CV segment with demand increasing in e-commerce, automotive aggregates, and liquefied petroleum gas segments.

“The CV passenger business continues its robust post-pandemic recovery, with school and staff transportation segments growing 39 per cent during the quarter,” he added.

Tata Motors’ intermediate, light, and medium CV sales also posted a 34 per cent growth during Q1FY25.

Sales of small and light CVs for Tata Motors declined by 6 per cent in Q1FY25 compared to Q1FY24, primarily due to financing challenges faced by first-time users in this category.

The industry feels that a healthy monsoon, expectations of policy continuity, and a thrust on infrastructure-related developmental projects by the government are expected to improve the demand for CVs.

Finance Minister Nirmala Sitharaman had increased capital allocation for infrastructure by 11 per cent in the Interim Budget to Rs 11.1 trillion.

Shenu Agarwal, managing director and chief executive officer of Ashok Leyland, said, “Against the unanimous view of the industry of a 4-7 per cent drop in FY25, we are holding a more positive view. There is a chance that the industry could end up flat, and maybe if May-June works out well, we might even see small growth. I am basing it on the pulse on the ground.”

As for Ashok Leyland, while its overall CV volumes posted a 6 per cent growth, sales of M&HCV buses grew by 82 per cent during Q1.

For VECV, light and medium-duty buses posted a 9.4 per cent growth during Q1. Overall, retail sales have also been positive.

Data from the Federation of Automobile Dealers Associations showed that between April and June 2024, retail sales of all kinds of CVs ended flat at 246,549 units compared to 244,834 units in 2023.

The industry expects demand to slow down somewhat during the second quarter (Q2) before picking up in the second half (H2) of the financial year.

“During monsoons, typically, mining demand goes down and there is a slowdown in demand in Q2, and already the month of June has started showing signs. In H2, however, we expect growth to be back, and the year would end on a positive note,” said an industry insider.

The year’s first half (H1) was expected to be impacted by elections and monsoons. Analysts like ICRA had noted earlier in February that the CV industry is expected to decline by 4-7 per cent in FY25 owing to the moderation of demand and high inventory with dealers.

Shamsher Dewan, senior vice-president and group head of corporate ratings at ICRA, had said in February that in H1FY25, demand would moderate as fleet operators wait to gauge the election impact on spending before placing orders. Demand is set to pick up after the monsoons.

CV sales peaked at over 1 million units in 2018-19, and in FY24, 967,878 units were sold. Analysts felt that activity in the cement, iron ore, and steel sectors is a positive macro sentiment, along with the work on the dedicated freight corridors.

However, some rating agencies like CareEdge felt that the CV industry would decline by 3-6 per cent in FY25.

“The CV industry is expected to experience sluggish growth, with overall sales volume likely to decline by 3-6 per cent in FY25. Several factors contribute to this, including general election-related disruptions, elevated vehicle costs, and high channel inventory levels,” said Arti Roy, associate director at CareEdge Ratings.

Roy, however, added that there is hope for improvement in the latter half of FY25 as infrastructure projects pick up pace after the monsoon and anticipated interest rate cuts provide some relief.

With elections having concluded and the monsoon season subsiding by September-October 2024, H2FY25 is expected to show signs of recovery in the CV industry. Expected interest rate cuts may provide relief in vehicle financing. Replacement demand and the mandatory scrapping of older government vehicles are expected to support volumes in FY25, CareEdge said.