New Delhi: India’s commercial vehicle(CV) industry is expected to grow mostly based on replacement demand, with rising freight rates, improved affordability due to lower GST rates boosting demand, a report by Nomura has said.
The return of replacement demand, where fleet operators look to retire older vehicles to purchase new ones, is expected to become a major reason for the sustained demand across the bus and truck segments. Newer truck models that come with an average age of ten years are expected to see a boost in demand, as older, more polluting vehicles are scrapped.
Higher freight rates have also helped boost fleet operators’ volumes, eventually motivating them to place new vehicle orders. There is a strong potential for cyclical upturn and improved demand visibility, as the current phase is expected to offer a surge in CV demand, the report said. Industrial volumes haven’t crossed the peak seen in FY19, and that could be the case considering the rising demand.
Though the dedicated freight corridors of the Railways are almost ready, the demand risk for these is limited, as they are generally used to transport bulk cargo. Non-bulk cargo, representing packaged items rather than loose commodities, is still primarily done through trucks, though tractor-trailers, used to transport ore and other raw materials, may see a decline in demand.
