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CVs, Are Rediscovering Their Mojo

TNI || New Delhi || 7th April 2022

Eicher

The commercial vehicle (CV) sector, which has been on a rocky road, is poised to make a strong comeback.

This is evidenced by the fact that March volumes increased by double digits over the previous year.

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Tata Motors Ltd and Mahindra and Mahindra Ltd (M&M) both saw a 16 percent increase in CVs, whilst Ashok Leyland Ltd and VE Commercial Vehicles Ltd (VECV), the joint venture between Eicher Motors Ltd and the Volvo group, saw 17 percent and 25 percent increases, respectively.

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These businesses had double-digit growth in the March quarter as well.

The volume rise for Tata Motors, Ashok Leyland, and VECV was 11–12 percent, while M&M sales increased by 54 percent.

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M&M’s faster growth, according to analysts, could be due to two factors. One, because of the limited use of semiconductors, the company’s focus has shifted to CVs, and two, the company is focusing on regaining market share.

With the government’s emphasis on infrastructure investment and the increased need for residential property projects, demand for CVs is projected to stay high.

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As economic activity rises and capacity utilisation improves, CVs keep rising. In a study released on April 1, analysts at Motilal Oswal Financial Services stated that they expect the impetus in the CV cycle to continue.

They add that Tata Motors is predicted to grow CV volumes by 25% in FY23, whereas Ashok Leyland is forecasted to expand medium and heavy CV sales by 43%.

The demand outlook is positive, but increasing costs of production and supply chain bottlenecks are putting negative pressure on margins as a result of continued geopolitical concerns.

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This could lead to price increases. Diesel costs have risen as well. These factors may have an effect on the sales of CVs, but it isn’t likely to be as big as in the passenger vehicle and two-wheeler markets.

The CV industry is strong, and the economy is on the rise. In this environment, passing on incremental expenses from rising oil prices is relatively simple.

Because end-demand is strong, fleet owners may pass on higher gasoline prices, said an analyst who requested anonymity.

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Meanwhile, rising fuel prices may increase demand for CNG-powered light commercial vehicles. As per experts at Motilal Oswal, Ashok Leyland’s CNG vehicles in its intermediate CV line, which were just launched, are gaining traction.

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