Commercial vehicle (CV) sales are expected to grow at a strong single-digit in FY25 after the industry clocked the 1 million unit mark in FY24, said Vinod Aggarwal, managing director of VE Commercial Vehicles, in an interaction with Arshad Khan. Aggarwal who is also the president of auto lobbying body SIAM said the impact of elections is limited to only three months and once the results are declared, fresh buying will take place. He said the export market for India’s CV industry has hit rock bottom and from here there can only be improvement. In the interaction, he spoke about VECV’s capex plans and the electrification process. Edited excerpts:
CV sales have been under pressure for the past few months. Is it due to elections or the sector has entered into a downcycle?
Last year the base was high in March quarter due to heavy pre-buying before introduction of BS6 OBD2 norms in April 2023. The second reason is Q4FY24 and April 2024 saw some impact of polls. While election year has always been positive for the sector, the three-month election season sees a fall in sales as payments get delayed, projects aren’t cleared and no tenders are issued. Once the new government comes, sales would pick up. I don’t see reason why there won’t be demand. Ups and downs are part of the cycle.
Some people would say GDP growth numbers are not reflected in CV sales which was stagnant last fiscal. What is your growth forecast for FY25?
You can’t compare GDP and truck sales on just a year-on-year basis. It has to be on a CAGR basis over a longer period of time. When the economy is in a boom phase, people buy CVs in bulk. Then they step back to check whether they haven’t bought in excess. So there is always a correction after boom. I am anticipating a strong single-digit growth for the CV industry in FY25. The economy is doing good, there is good replacement demand and the high infra spending is likely to continue. Mining activity has been robust and there is growing demand from e-commerce players. There is so much room for growth. For instance, compare what happened in China. The market for heavy-duty trucks in China is now 1 million plus units. We are at 260,000 units. Our first milestone should be to reach 350-400K in five years. For that to happen, we are expecting the economy to growth $5-7 trillion in three-five years.
Is the export market showing signs of improvement? Are you looking at the newer markets?
Exports are at rock bottom. I feel whatever problem was to happen, that has happened and now it will grow. From peak levels, CV exports are down 40-50% due to geopolitical and geo-economic factors. Some countries don’t have foreign exchange to make payments. Bangladesh and Nepal are down 75-80% from the peak. For VECV, we used to export 15% of our production. Now it is less than 10%. We are looking at markets in Africa, Middle East, SE Asia and Latin America.
What is VECV’s Capex for F25? How is electrification going on at VECV?
Our planned capex for FY25 is Rs 1,000 crore. This will be spent on new technologies, electric vehicles, some expansion and other areas. On the EV front, we will launch a small CV by January 2025. This will mark our entry into the 2-3.5 GVW (gross vehicle weight) pick-up market whose size is pegged at 3 lakh units per annum. The market for e-trucks is evolving; it may reach 8-10% by 2030.
Policy-wise, are you expecting any major change in auto sector after elections?
Policy-wise, I think a lot of things will continue. We already have a PLI scheme under implementation. We may see some new form of the FAME scheme. I don’t think there will be change in the GST rates.