India - Commercial Vehicle Sector - December 2021

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India – Commercial
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December 2021
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India - Commercial Vehicles Industry
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2
Table of Contents
1. Economic Outlook ..................................................................................................5

1.1 Global Economy ......................................................................................................... 5
1.2. Indian Economy ........................................................................................................ 7
1.2.1 GDP growth and Outlook ............................................................................................ 7
1.2.2 Gross value added (GVA) ........................................................................................... 9
2. Overview of Indian automotive industry .............................................................12

2.1 Overview ..................................................................................................................12
2.2 Indian Automobile market segments ...........................................................................14
2.2.1 Two Wheelers ........................................................................................................14
2.2.2 Passenger Vehicles .................................................................................................14
2.2.3 Commercial Vehicles ...............................................................................................15
2.2.4 Three Wheelers ......................................................................................................15
2.3 Industry performance in FY 2021 and Outlook .............................................................16
3. Historical trends and recent developments in CV industry ..................................18

3.1 Domestic sales trend .................................................................................................18
3.2 Exports Trend ...........................................................................................................19
3.3 Performance of key Players ........................................................................................20
4. Commercial vehicles outlook ...............................................................................22

3
List of Charts
Chart 1: Sequential growth in GDP at constant prices (in %) .................................................................7
Chart 2: Y-O-Y growth in IIP (in %) ................................................................................................... 11
List of Figures
Figure 1: Production and sales of automobiles in India ........................................................................ 12

Figure 2: Annual automobile exports trends ........................................................................................ 13
Figure 3: Share of different categories in automobile sales & production .............................................. 14
Figure 4: Quarterly sales & production of automobile in India in FY21 .................................................. 16
Figure 5: Category-wise sales trend of CVs in India ............................................................................. 18
Figure 6: Category-wise export trend of CVs from India ...................................................................... 19
Figure 7: Market Share of Key Players in Light Commercial Vehicle Segment ........................................ 20
Figure 8: Market Share of Key Players in Medium & Heavy Commercial Vehicle Segment ....................... 20
List of Tables
Table 1: Global Growth Outlook Projections (in %) ...............................................................................5

Table 2 : Quarterly GDP growth in % at constant prices (y-o-y) .............................................................8
Table 3: RBI's GDP Growth Outlook as on December'21 ........................................................................8
Table 4: Sectoral Growth – Quarterly (Y-o-Y % Growth) at Constant Prices ............................................9

4
1. Economic Outlook
1.1 Global Economy

The world economy contracted by 3.1% in CY2020 owing to the global outbreak of Covid-19. In comparison
with the forecasts made by IMF in World Economic Outlook, July 2021, IMF downgraded its projected global
economic growth outlook for CY2021 while the estimates remained unchanged for CY2022. The global
economy is now forecasted to grow by 5.9% in CY2021 and 4.9% in CY2022. The revision made for CY2021
is due to the downgrades made for advanced economy and low-income developing countries group.
Table 1: Global Growth Outlook Projections (in %)

Country/Group 2020 2021E 2022E
World Output –3.1 5.9 4.9

Advanced Economies –4.5 5.2 4.5
United States –3.4 6.0 5.2
Euro Area –6.3 5.0 4.3
Japan –4.6 2.4 3.2
United Kingdom –9.8 6.8 5.0
Canada –5.3 5.7 4.9
Remaining Advances Economies –1.9 4.6 3.7
Emerging Market & Developing Economies –2.1 6.4 5.1
Emerging and Developing Asia –0.8 7.2 6.3
China 2.3 8.0 5.6
India* –7.3 9.5 8.5
ASEAN** –3.4 2.9 5.8
Emerging and Developing Europe –2.0 6.0 3.6
Latin America and the Caribbean –7.0 6.3 3.0
Middle East and Central Asia –2.8 4.1 4.1
Sub-Saharan Africa –1.7 3.7 3.8
Notes: E-Estimates
*For India, data and forecasts are presented on a fiscal year basis and GDP from 2011 onward is based on GDP at
market prices with fiscal year 2011/12 as a base year.
**Includes Indonesia, Malaysia, Philippines, Thailand and Vietnam
Source: IMF – World Economic Outlook, October 2021
The growth in global GDP in H1 CY2021 was broadly according to the expectations and outruns for first
quarter global GDP were stronger than expected due to continued resumption of economic activities
coupled with policy support from the government. However, the momentum weakened in the second
quarter due to spike in Covid-19 cases in several emerging and developing economies and consequent
disruptions in supply.

5
Advanced economies group

During the Pandemic, the global economy faced disruption in supply chain due to temporary trade
restrictions and shortages of pharmaceuticals, critical medical supplies, and other products. As a
consequence of all this, manufacturers worldwide are going to be under greater political and competitive
pressures to increase their domestic production, grow employment in their home countries, reduce or even
eliminate their dependence on sources.
After a negative growth of 4.5% in CY2020, advanced economies group is projected to grow by 5.2% in
CY2021. IMF revised down its forecast from 5.6% made in July 2021 largely due to downgrade made for
United States on the back of large inventory drawdowns in Q2 CY2021, in part reflecting supply disruptions
and softening consumption in the third quarter of CY2021. The projections for United States subsequently
incorporate the infrastructure bill recently passed by the Senate and anticipated legislation to strengthen
the social safety net, equivalent to about $4 trillion in spending over the next 10 years.
Similarly, projections were downgraded for Germany and Japan to 3.1% and 2.4% respectively. For
Germany, it was partly due to shortages of key inputs weighing on manufacturing output and for Japan it
was attributed to the effect of the fourth State of Emergency imposed from July to September as Covid-19
infections hit a record level in the current wave. Overall, across the advanced economies group, the forecast
for CY2022 has been revised upwards from 4.4% to 4.5% in World Economic Outlook – October, 2021
release based on stronger rebound expected in H1 of CY2022 due to higher vaccine rollouts.
In the global economies, the recovery is strengthening due to health protections such as widespread
vaccinations which is an effective bulwark against the pandemic. Along with this, monetary policy
normalization from central banks has also been as a recovery measure.
Emerging market and developing economies group

After contracting by -2.1% in CY2020, the emerging market and developing economies group is estimated
to grow by 6.4% in CY2021. This is a revised forecast from 6.3% made in July, 2021 release and is backed
by revised upgrades in most of the regions in the group. Projections for China are slightly revised down to
8% in CY2021 due to stronger than expected scaling back of public investment while for India, the
projections have remained unchanged at 9.5% growth in CY2021. Apart from China and India, the
emerging market and developing economies group is revised down as the Covid-19 cases increased.
Meanwhile, projections made in other regions have been slightly revised upwards in CY2021.
IMF highlighted in its report that the economic recovery is highly dependent on vaccine access across
regions, hence economies will witness diverging recovery rates which may not remain steady as long as
people are exposed to the virus and its emerging variants. Close to 58% of the population is vaccinated in
the advanced economies while only around 36% of the population is vaccinated in the emerging economies
and less than 5% of population is vaccinated in low income group. In these economies, vaccine supply and
distribution remain the primary issue. Hence, speeding up the vaccination of the world population remains
the top policy priority, while continuing the push for widespread testing and investing in therapeutics. This
would help save millions of lives and also aid in preventing the emergence of new variants thereby
hastening the global economic recovery.

6
1.2. Indian Economy
1.2.1 GDP growth and Outlook
India’s economy grew by 8.4% year-on-year in Q2 of FY 22. On a sequential basis (quarter-on-quarter

basis), domestic economic output expanded by 10.4%. The easing/ removal of lockdowns across states
along with the steady decline in covid-19 cases and the higher vaccination rate facilitated higher economic
activity and output in the latest quarter.
Chart 1: Sequential growth in GDP at constant prices (in %)
30
22.31
20
9.94 10.36
7.51
10
0
Q1 2020-21 Q1 2020-21 Q1 2020-21 Q1 2020-21 Q2 2021-22 Q2 2021-22
%
-10
-16.9
-20
-29.69
-30
-40
Quarter
Source: MOSPI, CareEdge Ratings Economics Research report
The nominal GDP has grown by 17.6% from Q2 FY22 and is 8.4% higher than the previous quarter. The
high growth here is reflective of the price pressures across the various goods and services in the economy.
Even though, the elevated growth rates over year ago largely reflects the sharp contraction the country’s
economy suffered last year, the annual as well as sequential improvement suggests that the domestic
economy is on the path to recovery.
Even though the domestic economy the Indian Economy has come off the record decline of last year, it is
yet to surpass pre-pandemic level in a meaningful manner.
When compared with the pre-pandemic period i.e., Q2 FY20, the GDP in Q2 FY22 is only marginally
higher by 0.3%.

7
Table 2 : Quarterly GDP growth in % at constant prices (y-o-y)

Q2 FY20 Q2 FY21 Q2 FY22 Q2 FY 22 over Q2 FY20
Real GDP 4.4 -7.4 8.4 0.3
Nominal GDP 5.9 -4.0 17.6 12.4
There are increasing signs of higher level of activity across sectors. This has given rise to optimism that
the recovery in the domestic economy is strengthening. Even if the pace of recovery is sustained in the
next two quarters, India’s GDP for the year is expected to be only marginally higher than that in FY20 (by
around 2%).
Demand and investments are yet to see a meaningful and durable pick-up. Improvements in these are
expected to be limited and gradual given that even before the pandemic, the domestic economy was
grappling with low demand and subdued investment climate. To add to this, domestic and external
challenges and uncertainties still abound. The rise in price levels and the underlying threat from new
variants of the Covid virus and the associated challenges of on-and -off restrictions and lockdowns could
be a set-back / challenge for domestic as well as global recovery.
Given the uncertainties associated with the scale of economic recovery, the RBI is expected to be maintain
its growth focus and continue with the accommodative monetary policy stance even as it moves towards
gradual normalization of support.
As per CareEdge Ratings Economic Research Report, economic activity is expected to attain and surpass
pre-pandemic level from Q3 FY22 onward, hence the GDP growth for the FY 22 made is estimated at 9.1%.
As per RBI’s fifth bi-monthly monetary policy for 2021-22, The RBI highlighted downside risks to the growth
outlook – on account of the emergence of Omicron Variant and consequent renewed surge in Covid-19
infections across countries globally.
To add to this there are headwinds from elevated global commodity prices, potential volatility in global
financial markets with faster normalization of monetary policy in advanced economies and prolonged global
supply bottlenecks.
In terms of quarterly growth, it has revised downward the GDP growth projections for Q3 and Q4 of FY22
from its earlier estimates of October’21 (by 0.2% and 0.1% respectively). The Q1 FY22 growth estimate
too has been left unchanged at 17.2% and it has pegged Q2 FY23 GDP growth at 7.8%
Table 3: RBI's GDP Growth Outlook as on December'21

Q3 FY 22 Q4 FY 22 FY 22 Q1 FY 23 Q2 FY 23
GDP Growth 6.6 6 9.5 17.2 7.8
Source: RBI press release dated December 8, 2021

8
1.2.2 Gross value added (GVA)

Gross value added (GVA) is the measure of the value of goods and services produced in an economy. GVA
gives a picture of supply side whereas GDP represents consumption.
• There has been a broad-based year-on-year growth across all the sectors in Q2 FY22 driven by the low
base of year ago.
• Barring agriculture and mining all the other key sectors have in the latest quarter witnessed growth over
Q1 FY22.
• When compared with the pre-pandemic period i.e., Q2 FY20, the output of the service sector viz., trade,
hotel, transport & communication and finance, real estate & professional services have been lower
• GVA in Q2 FY22 grew by 7.9% on a sequential basis, following the contraction of 13% in the preceding
quarter.
o Industry (30% of GVA) as well as the services (58% of GVA) sector were the drivers of economic
output during the quarter.
o The industrial sector grew 6% on a sequential basis and by 7% on an annual basis. Manufacturing
followed by construction were the driver for growth in industry. Manufacturing output grew by 8%
while construction GVA was 9% higher than Q1 FY22.The higher manufacturing output can be
linked to the festive period demand for manufactured goods that prompted higher levels of
production during August September. The pick-up in construction can be linked to the easing of
restrictions and the focus on infrastructure by the government.
o The contraction in the agriculture sector on a quarterly basis (by 16% in Q2 FY22) is reflective of
the impact the unfavourable weather conditions prevalent during the quarter that led to loss of
output.
o The service sector output in the latest quarter was 16% higher than Q1 FY22 and 10% more than
a year ago. All the sub-segments of the service sector witnessed strong growth in Q2 FY22
following the contraction of the preceding quarter. The easing of restriction has led to a fast
rebound in this sector. The output of the sector however is yet to attain pre-pandemic levels.
Table 4: Sectoral Growth – Quarterly (Y-o-Y % Growth) at Constant Prices

Q2F Q-o-
Y22 Q%
At Constant Prices Q2 FY20 Q2FY2 Q2 growth
v/s Q2
1 FY22
Q2 FY22
FY2
0
Agriculture, forestry & fishing 3.5 3.0 4.5 7.7 -16.2
Industry -1.8 -3.0 6.9 3.7 5.9
Mining & quarrying -5.2 -6.5 15.4 7.9 -14.0
Manufacturing -3.0 -1.5 5.5 5.5 7.9

9
Electricity, gas, water supply & 1.7 2.3 8.9 8.9 5.2
other utility services
Construction 1.0 -7.2 7.5 -0.3 8.7
Services 8.2 -11.4 10.2 -2.4 16.2
Trade, hotels, transport, 6.8 -16.1 8.2 -9.2 24.9

communication & broadcasting
Financial, real estate & 8.9 -9.1 7.8 -2.0 7.0

professional services
Public administration, defence 8.8 -9.2 17.4 6.6 24.7

and other services
GVA at Basic Price 4.6 -7.3 8.5 0.5 7.9
Source: MOSPI, CARE Ratings Economics Research report
1.2.3 Industrial Growth
Growth in industrial output remained unchanged at 3.2% in October’21 compared with 3.1% in the previous
month. Negative growth in the capital and consumer goods segment has restricted the growth in overall
industrial output. Weakening of the base has contributed to slowing momentum in industrial activity from
the double-digit growth witnessed during the first five months of FY22. Sequential momentum in industrial
activity accelerated by 4.3% during the month. Output in all sectors witnessed an improvement over the
previous month except electricity, capital goods and consumer goods segment.
The IIP growth has witnessed a moderation over the past two months on account of base normalisation.
Companies are expected to ramp up output amid strengthening demand scenario which is expected to
support manufacturing growth in the near term. Performance of the mining sector is expected to pick-up
with resumption of mining activities that were impacted by extended monsoons. Thus, we could expect
industrial output to gather momentum in the coming months, however, it would continue to be subdued
with the waning of base-effect.

10
Chart 2: Y-O-Y growth in IIP (in %)
160.0
133.5
140.0
120.0
100.0
80.0
60.0
40.0 24.2 27.6

13.8 11.5 12.0
20.0 4.5
1.0 2.2 -0.6 -3.2 3.1 3.2
-1.6
0.0
-20.0
1.2.4 Concluding Remarks
The Reserve Bank of India (RBI) at its fifth bi-monthly monetary policy meeting for FY22concluded on 8th
December 2021, maintained the repo rate at a record low of 4% and continued with its accommodative
policy stance. RBI reiterated its emphasis on growth and economic revival.
The central bank’s focus on supporting economic growth prevailed at the just announced policy review, as
in its assessment even though economic recovery is gaining traction it is not yet strong enough to be self-
sustaining and durable. It has reiterated that the accommodative monetary policy stance would be
maintained for as long as necessary for reviving and sustaining economic growth. At the same time the
RBI continues to move towards gradual normalization of policy support. It did not announce any fresh
liquidity infusion measures and indicated that it would keep rebalancing and fine-tuning the liquidity surplus
in the banking system.
In its latest monetary policy meet, the RBI has kept CPI inflation target unchanged at 5.3% for the financial
year 2022. However, the upward revision of CPI estimate for Q3 FY22 to 5.1% from 4.5% earlier is
indicative of price pressures build up in the near term. Soaring vegetable prices, hike in telecom tariffs
along with lower statistical base are expected to push retail inflation print closer to the upper limit of the
RBI’s target band. Also, any plausible supply chain disruptions from Covid-19 latest variant could dilute the
impact of reduced fuel duties on CPI. Against this backdrop, Care Edge Ratings Economic Research
estimates the retail inflation for the year to average around 5.5% with an upward bias.
Going ahead, higher prices of edible oils, metals and crude oil in the international markets is likely to
pressure domestic retail inflation. The passthrough of high international oil prices to the transport sector
could indirectly impact other commodity prices. Food inflation is expected to be benign on the back of
deflation in vegetable prices, good kharif output and adequate buffer stock of food grains. Retail inflation
reading over the coming months could benefit from a helpful base and lower food inflation.

11
2. Overview of Indian automotive industry

2.1 Overview
The automotive industry is considered to be one of the major drivers of economic growth due to its linkages
with multiple industries. The growth of this sector benefits commodity sector as vehicle manufacturing
require steel, aluminium, plastic, etc. It also holds importance for the NBFC/Banks in form of automobile
financing. Moreover, it is a crucial source of demand for oil & gas industry. The automobile industry in India
is one of the largest in the world with sales of about 18.6 million units in FY2021. Its contribution to the
GDP of India stand at around 7%. There has been a consistent decline in sales over the past two years :
2019-20 was impacted by the consumption slowdown and 2020-21 was impacted by the impact of Covid-
19 induced lockdown restrictions apart from an overall economic slowdown.
Figure 1: Production and sales of automobiles in India
Production and Sales of automobile in India (million

units)
40
29 31
30 24 25 25 26 26
21 22 22 23
19
20 13
10
10
0
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 YTD
Sales Production
Source: CMIE
India was the fifth-largest auto market in 2020 and is expected to be the third largest in terms of volume
by 2026. Across segments of the industry, India is positioned amongst the leading markets, globally. In
volume terms, India ranks as the largest market for two-wheelers as well as tractors. It is also among the
Top-5 and Top-10 markets for Medium & Heavy Commercial Vehicles (M&HCVs) and Passenger Vehicles
(PVs), respectively. The major growth drivers for the automobile industry in India are the growing
household income, favourable demographics with a large proportion of young population, expanding R&D
hub and government’s support.
Besides growth prospects, India’s favourable Foreign Direct Investment (FDI) policy with 100% FDI through
automatic route, relatively low cost of manufacturing, adequate manpower pool has attracted several
foreign OEMs of the industry to invest in India and set-up manufacturing footprint. This include several big
brands such as Hyundai, Nissan, Toyota, Volkswagen, Maruti Suzuki, etc. Indian automobile industry
received Foreign Direct Investment (FDI) worth US$ 25.84 billion between April 2000 and March 2021.
India is the world’s largest tractor manufacturer and second largest bus manufacturer. It is also world’s
largest two-wheeler and three wheeler manufacturer.
India is also an automobile exporter with exports of 4.1 million units in FY2021. The share of automobiles
in India’s total exports stand at around 4.3%. The automobile export have increased at a CAGR of 2.5%
from 3.6 million units in FY2016 to 4.1 million units in FY2021. Exports have also been impacted by the
global impact of Covid-19 in FY2021. The Indian automobile OEMs are on a slow recovery path in their
domestic sales. But their exports increased manifold during the April-June 2021 quarter owing to low base

12
of the last year, the lower impact of COVID on India’s major export markets like Africa and Latin America,
and better overseas shipments with improved pandemic situation in other international markets.
Figure 2: Annual automobile exports trends
Annual Automobile Exports from India (Million units)

5 5 5
4 4
4 4 4 3
3
0
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 YTD
Source: SIAM

13
2.2 Indian Automobile market segments

The Indian automobile market can be categorized in four segments – two-wheelers, three wheelers,
passenger vehicles and commercial vehicles.
Two wheelers and passenger vehicles dominate the domestic Indian auto market. Two wheelers and
passenger cars contributed to asbout 81% and 15% respectively of total automobile sales in FY2021. The
share of various segments in automobile sales and production in India in FY2021 is depicted below:
Figure 3: Share of different categories in automobile sales & production
Automobile sales volume share in Automobile production volume share in

FY2021 FY2021
Passenger Passenger
3% 3%
Vehicles 15% Vehicles 14% 3%
1%
Commercial Commercial
Vehicles Vehicles
81% 81%
Three wheelers Three wheelers
Source: SIAM
2.2.1 Two Wheelers

This is the largest segment in Indian automobile industry contributing to around 81% of total sales volume.
Hero MotoCorp and Honda are the top two players in this segment having a market share of 36.5% and
25.2% respectively in FY21. The trend of domestic sales, production and exports of two wheelers in India
is presented below:
Exhibit 1: Market Trends of two wheelers in India

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22
YTD
Domestic
Sales 16,455,851 17,589,738 20,200,117 21,179,847 17,416,432 15,119,387 8,059,057
Production
18,830,227 19,933,739 23,154,838 24,499,777 21,032,927 18,349,941 10,588,617
Exports
24,82,876 23,40,277 28,15,003 32,80,841 3,519,405 3,277,724 2,619,293
Source: SIAM
2.2.2 Passenger Vehicles

This is the second largest segment with sales of around 2.7 million units in FY2021. Maruti Suzuki is the
market leader with share of around 47.7%, followed by Hyundai Motor at 36.4%. The trend of domestic
sales, production and exports of passenger vehicles in India is presented below:

14
Exhibit 2: Market Trends of passenger vehicles in India

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22
YTD
Sales 2,789,208 3,047,582 3,288,581 3,377,389 2,773,519 2,711,445 1,829,693
Production 3,465,045 3,801,670 4,020,267 4,028,471 3,424,564 3,062,221 2,204,082
Exports 6,53,053 7,58,727 7,48,366 6,76,192 662,118 404,400 372,492
Source: SIAM
2.2.3 Commercial Vehicles

This segment is considered as a lifeline for the economy as about two-thirds of goods and 87% of the
passenger traffic in the country moves via road. The growth of this segment is closely related with the
industrial activity in the economy. Tata Motors and Mahindra & Mahindra are the top players in this segment
with market share of 42.3% and 27.5% respectively. The trend of domestic sales, production and exports
of commercial vehicles in India is presented below:
Exhibit 3: Market Trends of commercial vehicles in India

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Upto Sep
21
Sales
685,704 714,082 856,916 10,07,311 717,593 568,559 272,051
Production
786,692 810,253 895,448 1,112,405 756,725 624,939 321,422
Exports
1,03,124 1,08,271 96,865 99,933 60,379 50,334 38,873
Source: SIAM
2.2.4 Three Wheelers

The three wheelers contribute to around 1% of total automobile domestic sales volume in India. Bajaj Auto
and Piaggio Vehicles are the major players in this segment with market share of 50.6% and 29.0%
respectively. The trend of sales, production and exports is presented below:
Exhibit 4: Market Trends of three wheelers in India

Particulars 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22
YTD
Sales
538,208 511,879 635,698 7,01,005 637,065 216197 126,433
Production
934,104 783,721 1022,181 1,268,833 1,132,982 611,171 425,366
Exports
4,04,441 2,71,894 3,81,002 5,67,683 5,01,651 392,941 300,708
Source: SIAM

15
2.3 Industry performance in FY 2021 and Outlook

The Indian automobile industry saw another consecutive year of decline with domestic sales and production
contracting by 13.6% and 14% respectively in FY2021. The decline was observed across all the market
segments with maximum decline observed in three-wheelers at 66.1% followed by commercial vehicles at
20.8%, two-wheelers at 13.2% and passenger vehicle at 2.2%. The quarterly trend for domestic
automobile sales in FY21 is depicted below:
Figure 4: Quarterly sales & production of automobile in India in FY21
Domestic sales and production of automobiles in India
59,44,968
55,96,255 55,83,149
66,99,114 73,17,446 71,48,934

14,91,216
14,86,594
Q1FY2021 Q2FY2021 Q3FY2021 Q4FY2021
Domestic sales Production
Source: CMIE
Domestic Sales and Production of Auomobiles in India (In

Millions)
8 7 7
7 7 6
6
6 6 6
5
5 5
4
3
3
1
2 1
1
0
Q1FY2021 Q2FY2021 Q3FY2021 Q4FY2021 Q1FY2022 Q2FY2022
Domestic Sales Production
Source: CMIE
The sales in Q1 were significantly low on account of several factors including transition from BS-4 to BS-6,
covid-19 induced lockdown, etc. The pandemic had adversely impacted the whole supply chain including
auto component and automobile manufacturers, dealerships and consumers. The mobility restriction had

16
created labour shortages and closure of factories leading to significant drop in production levels. The travel
restrictions and fear of job losses descended the consumer sentiments and impacted the demand.
With the easing of restrictions from Q2 onwards, supply chain gradually restored and there was recovery
in sales volume. Subsequently, the pent up demand, festive and wedding season led to the further recovery
in Q3. However, during Q4 the industry faced setback due to shortages in semi-conductors which is critical
in vehicle manufacturing. Also rise in fuel prices and price hike by OEMs impacted the demand. This led to
the reduction in domestic sales in Q4 as compared to Q3.
The automobile sector was on the path of recovery in second half of FY21 but the second wave of Covid-
19 has dampened the recovery. With most of the states imposing lockdown restriction in Q1FY2022, the
production as well as demand of automobile is adversely affected. Moreover, the ongoing rally in metal
prices can lead to increase in price of vehicles. This coupled with other unfavourable factors such as rise in
fuel prices, infections reaching to rural areas, etc. have lowered the demand. Therefore, Q1FY2022 will see
sluggish growth but the remaining year may see recovery which will depend on the pace of vaccination
and trajectory of Covid-19 cases. Overall, the automobile sales in FY2022 is expected to be only marginally
better than FY2021.

17
3. Historical trends and recent developments in CV

industry
3.1 Domestic sales trend

The Indian Commercial Vehicle (CV) Industry is the lifeline of the economy. About two-thirds of goods and
87% of the passenger traffic in the country moves via road. Past trends have shown that CV demand is
closely correlated with GDP growth rate (more strongly with the Index of Industrial Production, IIP) of the
country and therefore, it is believed that a phase of growth or slowdown in CV demand is a harbinger of
an upturn or downturn in the economy respectively. Due to economic slowdown and new regulatory policies
in FY20 the trend started declining. Further due to second wave of pandemic and shortage of steel supply
and semi-conductors and a weaker demand CV production has dropped to nearly 50-60% month on month.
The commercial vehicles domestic sales trend for various categories of CV is depicted below:
Figure 5: Category-wise sales trend of CVs in India
Historical Sales Trend

7,00,000
6,16,579
6,00,000
5,16,135
4,93,165
5,00,000
4,11,515 4,07,871
3,83,307 3,90,732
4,00,000
3,40,781
3,02,397 3,02,567
3,00,000
2,24,428
2,00,000 1,60,688
1,12,772
1,00,000 76,642
53,479
29,158
0
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Q1FY22 Q2FY22
M&HCV LCV
Source: - CMIE
The growth in M&HCV is considered to be a crucial indicator for pickup in investment activity while growth
in LCV is considered as indicator of consumption demand. It can be observed from the above figure that
both the M&HCV and LCV segments have witnessed consistent growth in the period FY2016 to FY2019. It
was driven by growth in infrastructure projects, recovery in rural demand, increased investment activity,
etc. However, there has been a sharp decline in the sales of the CVs in FY2020 onwards. This can be

18
attributed to various factors such as excess freight capacity owing to improved turnaround time post GST
& revised axle load norms, transition to BSVI, slowdown in economy, pandemic, etc.
The M&HCV segment is seeing a demand recovery post second COVID wave because of improvement in
fleet utilization levels, higher number of road construction projects and improved cement consumption. The
domestic sales of the top players has improved significantly for September 2021 as compared to previous
year September 2020. Tata Motors with increased domestic sale of 30% , Bajaj Auto with an increased
domestic sale of 99%,Ashok Leyland with and increased domestic sale of 12%
The LCV segment is supported by e-commerce which has also seen an upward domestic sale trend of
around 47% when compared with Q1FY22. In past, it also witnessed contraction, with domestic sales
volumes reducing by 20% in FY2020 and 17.3% in FY2021 y-o-y. It is expected that LCV may gain some
momentum as it is necessary for transporting essential goods and FMCG goods. The demand from
agricultural sector would be steady for the reason there were good monsoons and an increase in kharif
crops output.
3.2 Exports Trend

The trend in exports of commercial vehicles from India is depicted below:
Figure 6: Category-wise export trend of CVs from India
Category-wise export of Commercial Vehicles

80,000 67,927 64,552
52,772 51,257
60,000 48,676
43,719 44,093
35,197 38,046
40,000 32,786
22,333
17,548 15,248
20,000 10,004 7,619
6,002
0
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Q1FY22 Q2FY22
M&HCV LCV
Source: CMIE
It can be observed from the above figure that there has been a decline in the exports of CVs in the recent
years especially in LCV segment. This is primarily because of economic slowdown and liquidity crunch in
major export markets including SAARC, Middle East and Africa. The new regulations & political uncertainty
in Sri Lanka, duty changes in Nepal were some of the key developments during past four years which
adversely impacted the exports.
Further, with the outbreak of Covid-19 pandemic since March 2020, economic activities were disrupted
amid lockdown. The disruption of industrial activity and mobility restrictions adversely impacted the demand
for commercial vehicles. The major factors adversely impacting the commercial vehicle industry in the
recent years is discussed in the next section.

19
3.3 Performance of key Players

The major players in the CV industry include Tata Motors Ltd, Ashok Leyland Ltd, Mahindra & Mahindra
Ltd, VE Commercial Vehicles Ltd, etc. The market share of different players in MHCV and LCV segments is
depicted below:
Figure 7: Market Share of Key Players in Light Commercial Vehicle Segment
Market Share in LCV

Q2FY22 41% 32% 11% 7% 3% 6% Tata Motors Ltd.
Q1FY22 34% 43% 10% 5%1% 7% Mahindra &
2020-21 39% 38% 11% 7% 2%3% Mahindra Ltd.
Ashok Leyland Ltd.
2019-20 39% 39% 9% 4% 3% 6%
2018-19 41% 38% 9% 4% 3% 5% Maruti Suzuki India
Ltd.
2017-18 40% 40% 8% 2%3% 6% VE Commercial
2016-17 38% 42% 8% 4% 9% Vehicles Ltd.
Others
2015-16 38% 42% 7% 3% 9%
0% 20% 40% 60% 80% 100% 120%
Source: CMIE
It can observed from the above figure that Tata Motors has the highest market share in LCV segment at
41%, followed by Mahindra & Mahindra at 32% for Q2FY22.
Figure 8: Market Share of Key Players in Medium & Heavy Commercial Vehicle Segment
Market Share in MHCV

Q2FY2022 1%
55% 22% 19% 2%
Q1FY2022 58% 26% 13% 2% 1%
Tata Motors Ltd.
2020-21 51% 29% 16% 2% 2% Ashok Leyland Ltd.
2019-20 50% 32% 12% 3%2% V E Commercial Vehicles Ltd.
2018-19 50% 34% 11% 3%1% Mahindra & Mahindra Ltd.
S M L Isuzu Ltd.
2017-18 49% 34% 12% 3% 1%
Others
2016-17 49% 34% 12% 3% 2%
2015-16 52% 33% 11% 2% 2%
Source: - CMIE

20
In the MHCV segment, Tata Motors hold the maximum market share at 55% in Q2FY2020, followed by
Ashok Leyland at 26% for Q2FY2021.
Tata Motors
Tata Motors is the market leader in both the segments of commercial vehicle industry in India. It offers a
wide range of CVs among which the popular ones include Prima, Intercity coach, Tarmac coach, Venture,
Ace, etc. Its domestic sales in commercial vehicle segment declined by 22% in FY21 y-o-y in tandem with
the slowdown in industry. Tata Motors Commercial vehicle domestic sale in Q1FY22 at 43,400 units was
56% lower than the previous quarter (Q4 FY21) as was disrupted by the surge in COVID 2 nd wave. Its
domestic sales break-up into various categories of CV is depicted below:
Exhibit 5: Domestic CV sales of Tata Motors
Category 2019-20 2020-21 Q1FY22 Q2FY22 Variation
M&HCV 58,580 75,485 12,768 19,865 -22%
I&LCV 38,058 41,949 5,762 13,584 -9%
Passenger Carriers 8,599 37,698 2,184 2,760 -77%
SCV cargo and 1,37,253 1,55,723 22,686 42,017 -12%
pickup
Total Domestic 2,42,490 3,10,855 43,400 78,226 -22%
Source: Tata Motors Press Release
Mahindra & Mahindra

M&M hold strong position in the LCV segment having around 38% market share while having small presence
in the MHCV segment. Its popular CVs include Jeeto, Bolero Maxitruck Plus, Alfa Load, Bolero Pikup
ExtraStrong, Bolero Camper, etc.
Its domestic sales declined by 22% in FY21 y-o-y amid slowdown in the commercial vehicle industry. Its
domestic sales break-up is depicted below:
Exhibit 6: Domestic CV sales of Mahindra & Mahindra

Category 2019-20 2020-21 Variation Q1FY22 Q2FY22
LCV <2T 36466 23789 -35% 13,095 7,052
LCV 2 T – 3.5 T 151393 128100 -15% 54,422 27,299
LCV > 3.5T + 11272 4270 -62% 2,492 1,624
MHCV
Total Domestic 199131 156159 -22% 70009 35,975
Source: Mahindra & Mahindra Press Release
Ashok Leyland
Ashok Leyland is the second largest player in the MHCV segment with 29% market share and the third
largest in LCV segment with 11% market share. It has a diversified product portfolio consisting of Buses,
Trucks, Light vehicles, Defence vehicles, Engines, Gensets, etc., with vehicle weight ranging from 2.5T to
49T. Its domestic sales in FY21 declined by 35.5% in MHCV segment while it grew by 3.9% in the LCV
segment. The total vehicle sale have increased by 12% for the month of September as compared to sale
last year in the same month

21
4. Commercial vehicles outlook
1. Sales Forecast
The commercial vehicle industry is showing recovery as sales volume are improving. The registrations of
commercial vehicle grew by 78% from April-November 2021 which was at 60.6% in the preceding year.
The improvement in fleet utilization and rise in construction of infrastructure will lead to higher demand for
M&HCV while the LCV’s will have a steady growth which will be driven by e-commerce and logistics sector.
The demand for commercial vehicles in second half of FY22 seems to be steady. The sales for the whole
year might grow by 12%-13%. Further, in the financial year FY2022-23 demand for commercial vehicles
seems to be healthy because robust project completions in real estate sector and infrastructure activities
backed by National Infrastructure Pipeline (NIP) which will help support the demand. The measure of
reducing tax on diesel by Centre and State will help fleet operators to reduce operating costs which would
help improving cash flows which will further help improve the demand. To balance the rising prices of
metals like steel, aluminium CV manufacturers are expected to increase the price in the Q4FY22.Further,
some government’s initiatives such as Vehicle scrappage policy, PLI, greater spending on infra projects
may help in reviving the sector. The Sale revenue in the December quarter would remain flat although
industry will revive its losses in the quarter due to recent reduction in logistic cost due to deduction in diesel
prices. The forecasted sales for CVs is depicted below:
Exhibit 7: Sales forecast of commercial vehicles in India

Year Total MHCV LCV
2019-20 777,972 246,761 531,211
2020-21 618,893 178,236 440,657
2021-22P 697,348 191,065 506,283
2022-23P 759,394 211,187 548,207
2023-24P 796,755 222,774 573,981
2024-25P 834,733 235,604 599,129
Source: - CMIE

22
2. Production and Capacity addition
The commercial vehicle industry saw a capacity addition of 7,300 units in FY2021 on account of three
projects completion. However, further capacity addition is expected to be low in the coming years given
the low capacity utilization in the industry. The capacity utilization for most of the years in the last decade
was just 30-35% with capacity utilization of only 25% in FY2021. Even when the production of commercial
vehicle touched all time high in FY19, the capacity utilization was at 45%. Therefore, given the sluggish
demand and low utilization, there is no capacity addition expected in FY22. Manufacturers in coming years
will focus more on electrification of the vehicles. The forecasted production is depicted below:
Exhibit 8: Production forecast of commercial vehicles in India

Year Total MHCV LCV
2019-20 756,688 232,377 524,311
2020-21 624,919 181,242 443,677
2021-22P 688,046 208,449 479,597
2022-23P 748,570 225,712 522,858
2023-24P 782,001 235,398 546,603
2024-25P 817,571 247,325 570,247
Source: - CMIE

23
Contact
Kanmaani S Associate Director kanmaani.s@careedge.in 022 6837 4423
Tushar Shah Director tushar.shah@careedge.in 022 6837 4470
Vikram Thirani Director, Business Development vikram.thirani@careedge.in 022 6837 4434
About CARE Advisory, Research and Training Ltd (CareEdge Research)
CareEdge (CARE Group) is a knowledge-based analytical group that aims to provide superior insights based on technology, data analytics
capability and detailed research methods. CareEdge (CARE Ratings Limited) is one of the leading credit rating agencies in India. It has
an impressive track record of rating companies for almost three decades and has played a pivotal role in developing the corporate debt
market in India. CareEdge provides near real time research on all domestic and global economic developments. CARE Advisory, Research
and Training Ltd is a wholly owned subsidiary focused on providing advisory and consultancy services including the following:
CARE Advisory Research & Training Ltd

(Wholly-owned subsidiary of CARE Ratings Ltd.)
A-Wing, 1102-1103, Kanakia Wall Street, Chakala, Andheri-Kurla Road, Andheri East, Mumbai- 400093
Phone: +91-22-68374400
Connect :

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<<Report Title - Techno economic viability study of a greenfield capacity of 5MLPD ethanol

for <<Client name>>

<<Month & Year>>

Submitted by CARE Advisory Research and Training Ltd

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1. Economic Outlook ..................................................................................................5

2. Overview of Indian automotive industry .............................................................12

3. Historical trends and recent developments in CV industry ..................................18

4. Commercial vehicles outlook ...............................................................................22

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Figure 1: Production and sales of automobiles in India ........................................................................ 12

Table 1: Global Growth Outlook Projections (in %) ...............................................................................5

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1.1 Global Economy

Table 1: Global Growth Outlook Projections (in %)

World Output –3.1 5.9 4.9

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Advanced economies group

Emerging market and developing economies group

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1.2. Indian Economy

1.2.1 GDP growth and Outlook

India’s economy grew by 8.4% year-on-year in Q2 of FY 22. On a sequential basis (quarter-on-quarter

Chart 1: Sequential growth in GDP at constant prices (in %)

Source: MOSPI, CareEdge Ratings Economics Research report

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Table 2 : Quarterly GDP growth in % at constant prices (y-o-y)

Real GDP 4.4 -7.4 8.4 0.3

Nominal GDP 5.9 -4.0 17.6 12.4

Source: MOSPI, CareEdge Ratings Economics Research report

Table 3: RBI's GDP Growth Outlook as on December'21

GDP Growth 6.6 6 9.5 17.2 7.8

Source: RBI press release dated December 8, 2021

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1.2.2 Gross value added (GVA)

Table 4: Sectoral Growth – Quarterly (Y-o-Y % Growth) at Constant Prices

Industry -1.8 -3.0 6.9 3.7 5.9

Mining & quarrying -5.2 -6.5 15.4 7.9 -14.0

Manufacturing -3.0 -1.5 5.5 5.5 7.9

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Trade, hotels, transport, 6.8 -16.1 8.2 -9.2 24.9

Financial, real estate & 8.9 -9.1 7.8 -2.0 7.0

Public administration, defence 8.8 -9.2 17.4 6.6 24.7

GVA at Basic Price 4.6 -7.3 8.5 0.5 7.9

Source: MOSPI, CARE Ratings Economics Research report

1.2.3 Industrial Growth

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Chart 2: Y-O-Y growth in IIP (in %)

40.0 24.2 27.6

Source: MOSPI, CareEdge Ratings Economics Research report

1.2.4 Concluding Remarks

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2. Overview of Indian automotive industry

Figure 1: Production and sales of automobiles in India

Production and Sales of automobile in India (million

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Figure 2: Annual automobile exports trends

Annual Automobile Exports from India (Million units)

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