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Commercial vehicle sales in India to drop by 25-28%: ICRA

Commercial vehicle sales in India is expected to decline by 25-28%, thereby touching a decade-low in FY21 due to the COVID-19 induced economic slowdown, according to ICRA. While the ratings agency is optimistic that growth would be optically better in FY2022 at 24-27%, it expects that the recovery to industry volumes of even FY 2017 levels would not be possible anytime soon. This will have twin repercussions: the financial performance of commercial vehicle manufacturers will remain under strees; and credit profile of fleet owners will further droop.

“Accordingly, notwithstanding the sharp contraction of 47% in FY 2020, the segment volumes are expected to contract further by 35-40% during the current fiscal. Recovery over the medium-term hinges on macroeconomic revival, as well as pickup in construction and mining activity. Sustained and meaningful pick-up in the economy and infrastructure projects remains critical for the industry fortunes to reverse,” Shamsher Dewan, vice-president, Icra, explicates.

However, the light commercial vehicle segment is likely to see some demand recovery over the next few months. This has been attributed to positive signs in rural and semi urban areas as a result of a good summer crop, decent monsoon and lower cases of covid-19 infection.

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