Commercial Vehicle market in India is expected to reach new peak in FY24
Tuesday, 14 November 2023, 15:45 IST
The commercial vehicle (CV) market in India is poised to reach a new peak by the end of 2023-24, and it is expected to continue to grow rapidly in the next fiscal year due to the strong demand from various sectors such as construction and mining, the Executive Chairman of Ashok Leyland. Hinduja believes that the CV market might break the conventional demand cycle of an upswing and slowdown. "We are confident that we will surpass the previous peak", He further added that the next six months look very promising, and even in the next 12 months, based on customer feedback and projected vehicle volumes, the industry is not at the end of the boom cycle. Hinduja believes that the Indian economy's growth rate might alter the traditional cycle of the CV market as the country is undergoing a new phase of development.
India's truck and bus market hit a multi-year low in FY21 due to the pandemic, but it has been growing in the last couple of years. In FY23, it surpassed the FY18 peak by selling 962,000 vehicles, compared to 856,000 sold in FY18, to the Society of Indian Automobile Manufacturers. Ashok Leyland, one of the leading manufacturers, recorded an 181% YoY increase in net profit for the quarter that ended September, amounting to 561 crore. This was driven by higher sales that rose 17% YoY to 9,638 crore. The company's earnings before interest, taxes, depreciation, and amortization increased to 11.2% thanks to better net realization and lower commodity prices. Furthermore, raw material costs as a percentage of net sales dropped to 73% from 78% in the year-ago quarter, which helped the company save costs. Overall, these results show a promising trend in the Indian automobile industry.
Gopal Mahadevan, the CFO of Ashok Leyland, commented on the trend of discounting in the truck market, stating that the net realization in the industry has been improving. He attributed this improvement to a decrease in discounts, price increases, and strong demand from road construction and mining, as well as healthy industrial output. However, analysts are not as optimistic as the Ashok Leyland officials. The MHCV goods industry has slowed down over a high base, posting only 6.7% growth for H1. With an even higher base in H2 and the potential impact of general elections, it is expected to post mid-single-digit growth for FY24.
India's truck and bus market hit a multi-year low in FY21 due to the pandemic, but it has been growing in the last couple of years. In FY23, it surpassed the FY18 peak by selling 962,000 vehicles, compared to 856,000 sold in FY18, to the Society of Indian Automobile Manufacturers. Ashok Leyland, one of the leading manufacturers, recorded an 181% YoY increase in net profit for the quarter that ended September, amounting to 561 crore. This was driven by higher sales that rose 17% YoY to 9,638 crore. The company's earnings before interest, taxes, depreciation, and amortization increased to 11.2% thanks to better net realization and lower commodity prices. Furthermore, raw material costs as a percentage of net sales dropped to 73% from 78% in the year-ago quarter, which helped the company save costs. Overall, these results show a promising trend in the Indian automobile industry.
Gopal Mahadevan, the CFO of Ashok Leyland, commented on the trend of discounting in the truck market, stating that the net realization in the industry has been improving. He attributed this improvement to a decrease in discounts, price increases, and strong demand from road construction and mining, as well as healthy industrial output. However, analysts are not as optimistic as the Ashok Leyland officials. The MHCV goods industry has slowed down over a high base, posting only 6.7% growth for H1. With an even higher base in H2 and the potential impact of general elections, it is expected to post mid-single-digit growth for FY24.
