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Domestic sales of commercial vehicles (CV) in India have been affected by the second COVID-19 wave and the subsequent lockdowns, according to a report by CRISIL.


The sales growth of CV will be around 23-28pc in FY2022, around 5pc lower than the estimated 32-37pc sales predicted before the second wave. CV sales volume reached a 10-year low in FY21. 


An increased product mix and better capacity utilization are expanding the markets. As a result, CV markers credit metrics are going to improve. Factors like the pandemic, BS-VI transition, and the revised axle norms lead to 29pc and 21pc decline in CV sales volume in FY20 and FY21, respectively. 


Freight rates were down by 20pc in April as diesel prices soared. The rates further declined in May as the lockdown intensified, putting immense pressure on fleet operators. Recovery is likely in this fiscal year after the second wave subsides. As of now, recovery will be slow in the first quarter (April-June) as freight movement is affected. CV demands will regain as freight rates and demand return to normal after the lockdown in the second quarter, the report noted. 




The government’s infrastructural push followed by a surge in economic activity is likely to push the Medium and Heavy Commercial Vehicles (MHCV) growth to 35-40pc after two fiscals of downturn, said CRISIL Research Director, Hetal Gandhi.




Consumer staples and e-commerce demand will push the Light Commercial Vehicles (LCV) towards a 15-20pc growth. LCV demands in the public sector will remain low as state transport undertakings and demand for corporate buses will go down. The sector will witness multi-year lows despite having a 67-72pc growth. This fiscal year the CV volume will be below that of 2019’s at 30pc, said Gandhi 

Since March-end, the OEM inventory is at 35-40 days elevated level. BS-VI transition in the last fiscal year had pushed the inventories to a near-zero state.  




FY2022 will witness a positive upthrust in revenue growth compared to volume growth. High steel prices passed down to consumers (10-15pc price rise) and an increase in MHCV sales will boost the revenue growth.


CV makers can improve their margins by 7pc by controlling fixed costs and improving capacity utilization from 38pc to 45pc, CRISIL Associate Director Naveen Vaidyanathan. Even in the 10-year low volume of last fiscal year, they enjoyed a 4.4pc operating margin by reducing fixed costs. However, this fiscal year, the margins will be less than the 2016-19 average of 9.5pc.


Credit metrics will improve as interest cover increases to 3.6x from the 1.5x level of the last fiscal year. As lockdowns ease and vaccinations increase, the demand will recover in the second quarter. However, an impending COVID-19 third wave could derail it.  

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