Construction Mirror Article detail

• The upward revision in industry volume estimates for FY2025 stems from better-than-expected offtake in Q1 FY2025 and anticipation of a continued uptick in demand in H2 FY2025
• ICRA expects the domestic CV industry’s wholesale volumes to witness a nominal YoY growth of 0-3% in FY2025, against the earlier estimated decline of 4-7%. This follows a better-than-expected volume growth in 4M FY2025 and expectations of a marginal uptick in demand in the second half of the fiscal. FY2025 will be the second consecutive year of muted growth after a 1% and 3% YoY growth in wholesale and retail sales, respectively, in FY2024
• Among the various sub-segments within the CV industry, the medium and heavy commercial vehicles (M&HCV) (trucks) volumes in FY2025 are expected to report a nominal growth of 0-3% YoY, given the high base effect and the impact of the General Elections on infrastructure activities in the first few months of the fiscal. The segment had ended FY2024 with flattish volumes. Within this sub-segment, while the tipper volumes reported 4% YoY Contraction in Q1 FY2025, the haulage sub-segment showed a modest 3% YoY growth for the quarter. Tractor-trailers reported a modest 7% YoY volume growth in Q1 FY2025.
• Domestic light commercial vehicles (LCV) (trucks) wholesale volumes are expected to show a tepid YoY growth of (-1)% to 2% in FY2025 due to factors such as a high base effect, sustained slowdown in e-commerce and cannibalisation from e3Ws. The segment had witnessed a mild decline of 3% on a YoY basis in FY2024, owing to the above factors, in addition to a deficit rainfall impacting the rural economy. Increased total cost of ownership of LCVs has also led to a rising preference for preowned vehicles by the small fleet operators, which may impact the demand, going forward.
• The scrappage of older Government vehicles is expected to drive replacement demand for the bus segment from state road transport undertakings (SRTUs) in FY2025, supporting a YoY growth of 8-11%. The sub-segment volumes gained considerable traction in FY2024 and exceeded the pre-Covid levels.
• In terms of powertrain mix, conventional fuels (primarily diesel) continue to dominate the domestic CV industry with a penetration of over 90%, while alternative fuels (CNG, LNG and electric) had driven ~9% sales in FY2024. Relatively higher penetration of electric vehicles (EVs) has been witnessed in buses (as e-buses were covered under FAMEII subsidies but not the other sub-segments), followed by LCV goods, with a penetration of 7% and 1%, respectively, in FY2024
• ICRA expects the operating profit margin (OPM) of the domestic CV original equipment manufacturers (OEMs) 1 to remain range bound in FY2025 to 9.5%-10.5% on the back of muted volumes and higher competitive pricing pressures, although factors such as cost improvement, favorable raw material costs and better product discipline are expected to lend some support to the profitability. The OPM in FY2024 had improved by almost 300 bps to 10.7% supported by operating leverage benefits and better product mix. In addition, lower discounting and benign commodity prices aided in the margin expansion in FY2024. The capex and investments for the industry are likely to increase to ~Rs. 56- 58 billion in FY2025, against ~Rs. 34 billion in FY2024. These will be mainly towards product development, especially in the areas of alternative powertrains, technology upgradation and maintenance-related activities.

Sales of commercial vehicles - a barometer of economic activity - surpassed expectations last quarter driven by strong replacement demand and continued government spending on infrastructure.

As per industry estimates, more than 234,000 trucks and buses were sold in the local market in the three months ended June, a 4.5% rise from 224,000 vehicles sold a year earlier.

Among the various sub-segments within the CV industry, the medium and heavy commercial vehicles (M&HCV) (trucks) volumes in FY2025 are expected to report a nominal growth of 0-3% YoY, given the high base effect and the impact of the General Elections on infrastructure activities in the first few months of the fiscal. The segment had ended FY2024 with flattish volumes. Within this sub-segment, while the tipper volumes reported 4% YoY contraction in Q1 FY2025, the haulage sub-segment showed a modest 3% YoY growth for the quarter. Tractor-trailers reported a modest 7% YoY volume growth in Q1 FY2025.

Domestic light commercial vehicles (LCV) (trucks) wholesale volumes are expected to show a tepid YoY growth of (-1)% to 2% in FY2025 due to factors such as a high base effect, sustained slowdown in e-commerce and cannibalisation from e3Ws. The segment had witnessed a mild decline of 3% on a YoY basis in FY2024, owing to the above factors, in addition to a deficit rainfall impacting the rural economy. Increased total cost of ownership of LCVs has also led to a rising preference for pre-owned vehicles by the small fleet operators, which may impact the demand, going forward.

The scrappage of older Government vehicles is expected to drive replacement demand for the bus segment from state road transport undertakings (SRTUs) in FY2025, supporting a YoY growth of 8-11%. The sub-segment volumes gained considerable traction in FY2024 and exceeded the pre-Covid levels.

Demand momentum is expected to accelerate further in the second half, lifting sales by 9-12% to more than 1 million units in FY25, breaching earlier records. As many as 1,007,311 trucks and buses were sold during the pre-pandemic peak in FY19 and 967,878 units in the last financial year.

Recovery in rural demand and improving global trade led the Reserve Bank of India (RBI) to raise its real GDP growth forecast for FY25 to 7.2% from 7% in its monetary policy review in June.

Industry stakeholders expect the focus on capital expenditure, especially in growth-related programmes, to sustain amid an improvement in government finances. India’s fiscal deficit stood at 5.6% of the GDP in FY24, below the revised estimate of 5.8%. At the same time, the Centre’s net tax receipts last fiscal were higher than projected at Rs 23.27 lakh crore, or 100.1% of the year’s target.

Overall, India is projected to spend Rs 143 lakh crore on infrastructure in the next seven fiscal years through 2030, which will support sales of trucks and buses, mid-term.

Commercial vehicle industry volumes to see 7-10 pc growth in FY24: Icra

The commercial vehicle industry volume is expected to grow in the range of 7-10 per cent in the next financial year, according to the rating agency, Icra. The volume growth would be on account of government infrastructure spending, replacement demand, back-to-school and office scenarios and e-commerce expansion, it noted. Icra noted that the growth trends were visible in third quarter of the current fiscal, with wholesale dispatches reporting a growth of 16 per cent on a year-on-year basis, supported by replacement demand, improvement in the macroeconomic environment, and healthy traction in the underlying industries such as steel, cement, mining, automobiles, and e-commerce. Freight rates continued to hold up, which, coupled with healthy freight availability, is supporting fleet operator viability, it noted.

India Commercial Vehicles Market Analysis

The India Commercial Vehicles Market is projected to register a CAGR of 8.06%.

Largest Segment by Vehicle Type - Trucks : Rising demand for pickup trucks, owing to the growing e-commerce and logistics sector is responsible for making light commercial vehicles the largest segment in commercial vehicle sales in India.

Fastest-growing Segment by Vehicle Type - Light Commercial Vans : The growth in various industries such as e-commerce, construction, and logistics along with looking for fuel-efficient vehicle is driving the growth of light commercial vehicle across the India

Largest Segment by Fuel Type - Diesel : The majority of sales in the commercial vehicle were diesel-fueled CV in India, as diesel is the traditional fuel engine, generates more power, and easy availability is a must in commercial usage.

Fastest-growing Segment by Fuel Type - HEV : Norms by the government, awareness of e-mobility, development in charging infrastructure and incentives is making BEV the fastest growing fuel type in the India commercial vehicle market.

Mixed Fortune for Indian Commercial Vehicle Industry in June 2024!

India’s commercial vehicle (CV) industry witnessed a mixed performance in June 2024. While overall domestic wholesale volumes reported a year on year decline of 2.6% based on data from five leading manufacturers. A 5.8% sequential increase was observed, highlighting the complex dynamics at play in the industry. The YoY decline is attributed to a perceived slowdown in infrastructure and construction activities, likely due to the recent government transition. Market leader Tata Motors exemplifies this trend, with an 8% YoY decline in dispatches. Other manufacturers like Ashok Leyland, also saw muted performance. In contrast, VE Commercial Vehicles reported a 10.6% YoY growth in this category. Kinjal Shah, Senior Vice President and Co-Group Head - Corporate Ratings, ICRA Limited, said, “During June 2024, the Indian commercial vehicles (CV) industry (based on domestic wholesale volumes data published by five leading CV OEMs) expectedly registered a 2.6% YoY decline in wholesale volumes. This stemmed from the perceived slowdown in infrastructure and construction activities, given the transitional period for the newly elected Government to settle in. However, the domestic CV wholesale volumes reported 5.8% sequential growth in June 2024”.

The Current Dynamics of Commercial Vehicles Market!

Top 5 Trends for the Commercial Vehicle Industry in 2024

Just for you: the top five trends we foresee having an impact on the success of your dealership’s commercial department.

• Light-duty trucks will play an expanded role in the business world. Continued supply issues will prompt business owners to leverage myriad add-ons, like toppers, unique toolbox configurations, and tonneau options, which can expand the utility of light trucks for delivery and other services. With a pickup’s open vehicle bed, they can manage bigger loads and unevenly shaped freight.

• Medium-duty truck owners will look for multi-purpose solutions. Just as business owners are pressing their light-duty trucks into multiple roles, owners of medium-duty vehicles will also look to products that will enable them to do more with their trucks. Upfit solutions that offer the ability to be easily “switched” out for different purposes should see higher demand.

• Final-mile delivery business will continue to shape demand for specific vehicle types. U.S. commercial vehicle availability has been affected by a number of major issues, including rapid final-mile growth. Even though fewer commercial vehicles were sold in 2022, there was a significant increase in some new vehicle types.

• EVs will dramatically increase market share of final-mile business. Increasingly strict government regulations will propel the adoption of EVs to new heights in 2023. California legislators are dedicated to the adoption of zero-emission vehicles and where California goes, the rest of the country often follows. Although implied concerns over greenhouse gasses seem to be a major motivator in EV development, there are more business-oriented advantages made possible by the industrial internet of things (IIoT). Myriad software programs make it easier than ever to integrate fleet EVs with a business’ value chain.

• Customer demand will continue to force providers to bring merchandise and services to the customer instead of customers going to their place of business. This role reversal began long before the Covid pandemic and shows no signs of abating. In addition to delivery continuing its meteoric rise as an essential service, the franchise space predicts that services like home renovation and restoration, in-home health care, mobile car repair, home security, pet grooming, and pest control will be big in 2023. Recreation is also close to the top of the 2023 trend list, along with expected growth in secure transport for the cannabis industry.

Electric Mobility In Commercial Vehicle Segment - Its Future & Benefits

The transportation and commodities sectors in the nation are supported by commercial vehicles (CVs). People can satisfy their demands and have their goods delivered from one location to another with the use of CVs. The commercial vehicle sector in India is once again enjoying a resurgence in demand after a painful two years of sales declines. The demand for CVs has risen by 68% as of right now, according to SIAM’s first-half sales numbers for FY2023. The domestic CV sector is now witnessing a revival of demand as a consequence of the government’s considerable infrastructure expenditure, which has led to the sale of M&HCVs and a replacement requirement for passengertransporting buses. The requirement for smaller buses benefits the LCV category as well, although sales of compact CVs used for last-mile deliveries are substantially increasing because to the booming e-commerce sector. Compared to railroads, trucks have a number of benefits. For instance, trucks may accept goods in lower amounts than rail transit, they can go through rural and hilly areas, and they take less time to load and unload goods than rail. India’s rapid economic development has also played a significant role in driving the truck market. The expansion of industries including infrastructure, real estate, logistics, mining, etc. has been further accelerated by the robust economic growth. Rising earnings, urbanization, the expansion of the rural economy, e-commerce, etc. are further drivers pushing this industry.

The Future of Electric Mobility in Commercial Vehicle Segment

Electric mobility may cause disruptions and structural changes in the automobile sector as it picks up steam in India and other nations. Over the past two years, the car sector has proven to be quite resilient. The decline in worldwide sales that had begun before the COVID-19 epidemic was made worse by the pandemic itself. The sector nevertheless has bright long-term potential despite short-term supply problems. By the middle of this decade, it is anticipated that global passenger car sales would peak. Emerging markets like India will take the lead. In India, the total cost of ownership for electric two- and three-wheelers is projected to be more appealing than for passenger or large commercial vehicles (PVs and HCVs). By 2030, sales of new E2Ws and E3Ws may increase to 50% and 70%, respectively. With delayed electrification, internal combustion engines (ICE) will continue to rule the PV and HCV scene in India. By 2030, sales of new vehicles are anticipated to be dominated by electric PVs and HCVs, with respective percentages of 10 to 15 and 5 to 10 percent. Electricity, rather than diesel or gasoline, is used to power commercial vehicles. Vans, trucks, buses, excavators, wheel loaders, and tractors are examples of electric vehicles. Electric vehicles can also include agricultural gear like combine harvesters or tractors. They are powered by an on-board battery that receives recharging from the electrical grid. The electric motor converts electrical energy into mechanical energy, much like in an electric commercial vehicle. One of the essential parts of the electrical system that fuels the power network is the DC-to-DC converter. The driver inverter in these cars converts the battery’s DC energy into the AC energy required to power the vehicle. The largest vehicles on the road are still fuelled by fossil fuels, but the first all-electric light commercial vehicles are already on the road. Light hybrid trucks and excavators utilize both diesel and electric engines. In a few years, long routes for heavy-haul transportation may be run on “e-highways” using electric overhead contact wires. Fully electric vehicles with zero emissions are advantageous for LCVs used for short-distance, in-town travel. Electric vehicles will have cheaper overall ownership costs than internal combustion engines by 2025. The fact that batteries have a low power compared to their weight, which restricts payload, is one of their most important drawbacks. At least for short-distance travel, battery-powered electric CVs will undoubtedly be the most prevalent of the three technologies after 2030. To begin with, the public and policymakers broadly favour battery-powered electric vehicles as a zero-emissions substitute. As a result, the bulk of worldwide research effort in the passenger and commercial vehicle industries has gone toward upgrading battery technology, which has led to the development of more high-energydensity batteries. In every market category, India is pushing for electric mobility, and the OEMs are exploring their possibilities for launching electric commercial vehicles, starting with LCVs. Like the Tata Ace electric LCV, which the company just unveiled in India. Similar to this, the market for commercial three-wheelers is exploding with electric vehicles.

Shifting from Diesel to Electric Commercial Vehicles

You cannot simply walk into a dealer at this point in the battery electric vehicle revolution and purchase a battery-electric truck. But because that day isn’t too far off, you could already be considering making such a shift. Compared to purchasing a diesel, there is a lot more to consider when purchasing a BEV, including working with utility companies, site planners, and potential fleet growth. The major issue currently with the introduction of EVs is the electric infrastructure. Small charging stations are required for small CVs, whereas high voltage chargers and greater power are required for large CVs. It’s difficult to plan and put up EV infrastructure. Another issue entirely is the infrastructure. Fitting an existing site with the correct electrical service takes time, and depending on the installation that is being considered, it may necessitate conversations with both the utility providers and, if the property is leased, the landlord. Sometimes cities will contribute to the cost of the infrastructure, but the utility may subsequently own a portion of that infrastructure. Such negotiations can greatly lengthen the project’s lead time. Additionally, fleets will require early involvement from the utility and an engineering company. When contemplating electrification, fleets should collaborate with an installation partner that can evaluate the building and energy use and offer suggestions for lowering electrical loads inside the structure, such as solar power or lighting upgrades. On-site battery systems may be charged during off-peak hours in order to charge the vehicles during peak hours if necessary. Smart charging is another alternative that can be utilised to balance the demand for power.

Benefits of Electric Trucks

More effective: Diesel vehicles allow fleets to precisely determine how much cash is needed to supply according to their present business models. There are also maintenance fees and acquisition charges to consider. In India, electric trucks have the potential to be several times more efficient than their diesel-powered equivalents. They provide a reasonable strategy for moving the same cargo.

More working hours: Due to their clean technology, electric vehicles in India are undoubtedly silent. But this also means that these trucks can be operated at off hours or during night. This can significantly impact businesses in urban congested areas where diesel trucks have a specified time to run on roads. With electric trucks, enterprises have everything they need, and they can plan the day accordingly. Electric trucks can provide more precision to day-to-day supply chain process.

Lower emission: Electric vehicles provide a route to a more environmentally friendly future at a time when global warming and clean air have become hot topics in both national and international arenas. Even though they only make up 5% of all cars on the road, heavy-duty trucks account for more than 20% of all carbon emissions produced by the transportation industry. This number may be greatly lowered by using electric trucks.

Employee happiness: According to several research, fleets using electric trucks have greater employee satisfaction rates. These vehicles provide renewable energy without sacrificing productivity, quickness, or technology. Deploying electric trucks in India may also have a psychological component. The idea of driving clean energy technology might help corporations to retain more employees and infuse productivity in their supply chain process.

Other Advancements in CV Industry

Lightweight construction is still a hot issue. Highstrength and ultra-high-strength steels, as well as other materials like aluminum, will help to reduce vehicle weight going forward. This comprises truck mounts as well as cranes, cement mixers, and other construction vehicles. Performance, effectiveness, and fuel usage in transportation have all increased as a result. Constant change is required in the realm of safety. Since they represent the greatest risk of tipping over, the safety cabins for excavators and cranes are constructed from special materials. To increase active safety, several innovative automatic driving aid systems are already being installed in trucks and buses. Fleet operators that digitally connect all of this data into a single, massive data cloud in the future would have total control while conserving resources like time, money, and energy. In the future, cars will be able to “talk” to one another directly and warn one another of potentially harmful situations.

Data and connectivity: Connectivity will be essential in the next generation of vehicles. Highspeed connection will be included in cars to make driving safer. A high bandwidth connection is therefore required to display 3K to almost 4K video. Many businesses have embraced technology to provide diversified mobility and the digitalization of the key drivers in the automotive sector. Additionally, connectivity will have an impact on data gathered about environmental concerns, parking, traffic, and public transit. The ability to connect will make it easier to collect and process data. In 2023, the tendency is anticipated to be evident in all areas of the auto industry. Devices for tracking vehicles are increasingly widely used. There are several sensors in automobiles. Additionally, the manufacturing industry is putting software to use by demanding the best of software developers. As a result, drivers employ tools and programmes to maintain their automobiles. In case of a driving emergency, the systems are also built to handle them. For instance, the gadgets can help in the case of a car accident by dialling for help and sending position coordinates. The message is clear as a result: The drivers are being saved in novel ways. Another major advancement in the CV industry from the last few years is Telematics. The telematics management system, which offers a number of advantages, is one of the most important developments. It provides comprehensive fleet statistics as well as tailored suggestions for improving fleet utilization. Additionally, it increases driver effectiveness generally, ensures the security of the truck and its occupants, remotely monitors vehicle diagnostics in real time to prevent breakdowns, increases vehicle lifespan by keeping track of vehicle health and driving habits, and enhances working conditions and business productivity. Telematics has the potential to significantly influence the future of India’s trucking and logistics business due to its increased emphasis on usability. As a result, over eight years ago, Tata Motors became the first Indian automaker to equip its cars with a telematics system.