Veer Sharma | December 2, 2022
Fast Moving Consumer Goods (FMCG) and e-commerce will accelerate projected growth
Light commercial vehicles (LCV) which account for 25 percent of the entire truck fleet, will be driving the growth of commercial vehicles due to strong demand from fast-moving consumer goods and e-commerce, according to three automobile analysts.
LCVs consist of pickup trucks and vans for transporting goods. Their gross vehicle weight varies from 3 to 7 tonnes.
“We expect the sector to grow 30 percent in the second half of the current financial year,” said an analyst tracking the sector, who spoke to The Bottomline on the condition of anonymity. The FMCG sector grew 11 percent in the quarter ended September 30, compared with 6 percent in the previous quarter, according to NielsenIQ’s FMCG snapshot published on September 1, 2022.
This forecast assumes importance as the pandemic triggered the sharpest decline in the last two decades for the sector. The commercial vehicle sector plunged 47 percent from its peak during lockdowns, said the analyst quoted earlier. Sales of LCVs fell 20 percent in the financial year 2019-20, he added.
Commercial vehicles grew 35-40 percent year-on-year in the first two quarters of FY 2022-23.
Emails sent to the corporate communication division of Tata Motors, Ashok Leyland, and Mahindra and Mahindra remained unanswered till press time.
Analysts say rising repo rate will not hamper projections due to high freight rates. Freight rate is the price requested for transporting cargo. The higher the freight rate, the better it is for the vehicle segment. The current rate at Rs46,800 per tonne kilometre cost is up 13 percent from 2019 before the onset of the pandemic, said the third analyst.
The analysts tracking the sector revenue of Ashok Leyland, the second largest truck manufacturer in the country, is expected to grow 22 percent in the second half of the financial year,” said the third analyst. Of the projected growth, 30 percent will be contributed by the medium and heavy commercial vehicle segment.”
Tata Motors, the industry leader, narrowed its losses to Rs944 crore in the second quarter of this financial year from Rs4,441 crore in the same quarter last year. Ashok Leyland’s profit more than doubled in the second quarter of Fiscal 23, from the year-ago period.