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Rating agency Icra has said the domestic commercial vehicle (CV) industry’s uptrend to be arrested in FY25, with a decline of 4-7% in wholesale volumes. This follows a muted YoY growth of 1% and 3% for wholesale and retail sales, respectively, in FY24. The healthy growth witnessed in H1 FY24 tapered due to a slower Q4 FY24, which saw a decline of 4% in wholesale volumes due to factors such as implementation of the Model Code of Conduct and perceived slowdown in infrastructure activities ahead of General Elections. 

It expects the operating profit margins (OPM) of the domestic CV OEMs to contract marginally in FY25 to 8.5%-9.5% on the back of lower volumes and higher competitive pricing pressures. The OPM is estimated to have improved by 250-300 bps in FY24, as the industry volumes were at a five-year high.  In addition, lower discounting by the OEMs and benign commodity prices aided in the margin expansion in FY24. Going forward, capex and investments for the industry are likely to increase to Rs 59 billion in FY25 against Rs 37 billion in FY24. These will be mainly towards product development, technology upgradation and maintenance-related capex.

Moreover, it stated domestic light commercial vehicles (LCV) (trucks) wholesale volumes are likely to decline by 5-8% in FY25 due to factors such as a high base effect, sustained slowdown in e-commerce, and cannibalisation from e3Ws. The segment witnessed a mild decline of 3% on a YoY basis in FY24, owing to the above factors in addition to a deficit rainfall impacting the rural economy. The scrappage of older Government vehicles is expected to drive replacement demand for the bus segment from state road transport undertakings (SRTUs) in FY25, supporting a growth of 2-5% on an overall basis. The segment volumes gained considerable traction in FY24 and exceeded the pre-Covid levels.