ICRA reports that the domestic CV industry is steadily recovering and approaching pre-Covid highs.

The M&HCV Truck segment reported a volume increase of 77,291 units, or 28% YoY, in Q3 FY2023.

According to ICRA, the domestic commercial vehicle (CV) industry will grow by 7-10% in FY2024, after growing by 24-26% in FY2023. This expansion would be driven by the government's continued emphasis on infrastructure development, as well as the continued strength of underlying demand drivers such as infrastructure and construction activity. As a result, ICRA has taken a consistent viewpoint on this industry.

The macroeconomic environment improved, replacement demand increased, and the underlying industries—steel, cement, mining, automobiles, and e-commerce—saw good traction in Q3 FY2023. This demonstrates growth tendencies.

Wholesale dispatches increased by 16% year on year. Furthermore, freight rates are holding steady, which helps fleet operators' viability when combined with good freight availability. In Q3 and the first nine months of FY2023, all three sub-segments, light commercial vehicles (LCV), buses, and medium and heavy commercial vehicles (M&HCV), continued to grow.

The M&HCV (Truck) segment reported a volume increase of 77,291 units, or 28% YoY, in Q3 FY2023, marking the segment's ninth consecutive quarter of double-digit YoY growth. Following a 25-30% increase in FY2023, ICRA forecasts that the segment's volumes will grow at a healthy 8-10% rate in FY2024.

This expansion will be driven by replacement demand as well as demand from the steel, cement, and mining industries as economic activity and infrastructure spending increase. Quarterly volumes in the segment have risen above pre-Covid levels, but they remain below industry highs of nearly 1 lakh units seen in Q4 FY2019.

The passenger carrier segment has grown significantly since Q4 FY2021, when offices, schools, and other educational institutions reopened. The quarterly volumes reported in each of the current fiscal's three quarters, at 16,000-19,000 units, have finally returned to pre-Covid levels, significantly lower than the industry highs of 28,000 units seen in Q4 FY2019.

ICRA anticipates volume growth of 120-130% in FY2023, owing to a low base and the establishment of new offices and educational institutes. In addition, the recent Union Budget prioritized the retirement of older government vehicles. This is expected to drive SRTU replacement demand in FY2024, supporting the overall growth of 12-15%.

When we look at the CV industry, we typically divide it into three categories: LCV, M&HCV, and bus. So, while the overall CV industry has yet to reach pre-Covid levels, it already reached pre-Covid levels on the LCV side. However, the highs of FY2019 would be reached in FY24 or FY25. Similarly, this industry would be very close to reaching pre-Covid levels in FY2024 for M&HCV.

We are still far away from the bus segment because, obviously, there has been a change in the overall way corporates have been working. The reopening of schools and offices will fuel a lot of demand in the bus segment, and we are seeing significant growth here.