After zooming in FY11, heavy vehicle sales head to low gear

With the overall economy in general and the manufacturing sector in particular slowly losing steam of late on the back of the rising commodity and energy prices, the growth of the medium and heavy commercial vehicles segment is likely to be moderate this fiscal.

According to a report by Centrum Broking, "the medium and heavy commercial vehicles [M&HCVs] segment will register 10% and 11% volume growth in FY12 and FY13, respectively, compared to a full 36% in FY11."

This is because of the high sensitivity of this segment to IIP growth, coupled with a benign GDP outlook, demand moderation is likely, the brokerage firm added.

The economic stimulus package, pent-up demand, cheaper financing and pre-buying ahead of new emission deadline had seen the auto sector vrooming to set record sales last fiscal.

While car and two-wheeler sales topped all projections, the overall demand spurt has seen the commercial vehicle (CV) industry clocking a full strong 26% growth in FY11.

But these factors are unlikely to prop growth in the current fiscal as the general growth sentiment has been petering. Also, rising interest rates would also will impact demand, the report noted.

The light commercial vehicle (LCV) to CV ratio currently stands at 48% compared to an average 88% for emerging and developed countries, leaving huge growth potential.

However, the LCV and CV segments are likely to do better going by the sheer nature of this market, which demands regular relaunches or new launches, it said.