Truck sales to grow 6-8% in 2017-18, says ICRA

The commercial vehicle industry is likely to grow 6-8 per cent in 2017-18, according to rating agency ICRA. Growth moderated from 11.5 per cent in 2015-16 to 3.5 per cent in the 11 months of 2016-17. ICRA reckons growth in 2017-18 will be 5-6 per cent.

The industry faced many challenges in 2016-17 like waning replacement demand, weak cargo availability, and uncertainty related to the goods and services tax.

Sales took a hit after November when the note ban froze road logistics, which depends heavily on cash. With transition to the Bharat Stage-IV emission standards from April, the industry anticipated pre-buying in the last quarter but the revival in sales in January-February was below expectations. 

ICRA said subdued economic activity had forced fleet operators to defer expansion plans and the GST had prompted automobile companies to realign production and inventory in the new tax regime.

ICRA expects the industry will regain momentum with an increased thrust on infrastructure in the Union Budget, implementation of fleet modernisation programmes, and higher demand from consumption-driven sectors and e-commerce logistic service providers. 

It also estimates exports to reach 160,000 vehicles by 2019-20. Commercial vehicle exports grew 7 per cent in the 11 months of 2016-17 on expansion of market coverage by automobile companies and healthy demand from key markets. 

Commercial vehicle makers are planning to expand their market coverage in Asia, Africa and the Middle East. 

Historically, they have maintained a strong grip in Sri Lanka, Bangladesh and Nepal, but have now widened their focus to the Middle East and Africa. 

New vehicles and upgraded technology have allowed them to enter the relatively advanced markets of south-east Asia.