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Rating agency ICRA in its latest report has said that the Indian commercial vehicle (CV) industry volumes are likely to grow in the range of 7-10% in FY24, propelled by replacement demand, pick-up in mining, infrastructure, and construction activities, and overall healthy fleet utilisation levels. It noted that this is despite the 5% YoY and 41% sequential contraction in volumes in April 2023 due to expected price increases with the transition to BS6 2.0 and associated pre-buying in March 2023. 

According to the report, the growth in FY24 would follow a year of healthy demand in FY23, wherein the industry volumes expanded by more than 33%, supported by a favourable base, as well as a healthy pick-up in macroeconomic activity. It stated that the scrappage policy, which was announced in March 2021, has been implemented from April 1, 2023, and is likely to contribute to the growth of new CV sales. It is being implemented in phases, primarily with a view to reducing the carbon footprint. In the first phase, it has been proposed to mandatorily scrap Government vehicles older than 15 years from April 1, 2023, which has a potential to replace 9 lakh vehicles. The second phase mandates scrapping based on vehicle fitness. 

Accordingly, the report said heavy commercial vehicles (HCVs) older than 15 years and other vehicles older than 20 years need to undergo a mandatory fitness test from October 1, 2024. Although voluntary in nature, several measures have been proposed to incentivise scrapping of older vehicles - including hike in fitness certificate, renewal fees, and levy of green tax on older vehicles, increasing their cost of ownership. Further, it said on submission of the scrapping certificate, new vehicle purchases would be eligible for discounts from the OEMs, road tax rebate, and registration fee waiver.