In a recent report on the automobile industry, noted credit rating agency ICRA has maintained a Negative year-end outlook for the commercial vehicle (CV) segment over the near term, given the slowing economic growth, current overcapacity in the CV space and tight financing environment.
“ The M&HCV (Truck) segment has been significantly impacted over the past year, with volumes contracting by a sharp 41% in YTD FY2020. Excess capacity created in the system post revision of axle load norms in July 2018, coupled with slowdown in the economy and infrastructure projects and the resultant lower freight availability continue to weigh on the demand prospects. The LCV (Truck) segment also continues to reel under the impact of slowdown in consumption demand, in both rural and urban areas, which has impacted freight availability significantly. In addition to these factors, weak credit availability continues to be a key deterrent, with credit norms being tightened amid elongation of collection cycle and rise in delinquency levels,” the agency report said.
The arrival of BS VI emission regime from April is also unlikely to create any pre-buying momentum due to the current macro-economic scenario, the report further said. The report also projects no major change in demand trend for the light commercial vehicles, a segment which has been driving commercial vehicle sales in the country in the recent years. “With consumer-sentiment continuing to remain subdued and challenges on the financing front, the LCV (Truck) segment is expected to decline by 8-10% during FY2020. The passenger carrier segment, which has also contracted during YTD FY2020, is expected to recover marginally on expectation of replacement-led demand from SRTUs and continuation of improvement in public transport segment across various cities,” ICRA report maintained.