Analysts forecast 35 percent growth for MHCVs supported by a 14 percent rise in capital outlay in Budget 2023

In its assessment of the impact on the medium and heavy commercial vehicle (MHCV) sector from Budget 2023, rating firm CRISIL has said that sales in the sector are expected to rise 35-37 percent year-on-year this fiscal, on a low base, supported by a healthy 14 percent rise in capital outlay in the budget. “Next fiscal, with capital outlay rising 28 percent, multi-axle vehicles, tractor-trailers and tipper trucks will benefit,” the ratings agency report has said.

Vinod Aggarwal, President, SIAM and MD and CEO, VECV sharing his reaction on the Union Budget said, “The announcement of funding various government departments for replacement of old vehicles is also commended and a 33  percent increase in capital outlay with an effective provision of Rs 13.7 lakh crores will spur growth in the economy resulting in a positive impact on the Auto sector.”

In a report, IIFL Securities has said that in Jan 2023, the MHCV industry grew 26 percent year-on-year. The sector’s seasonally adjusted annual rate (SAAR) , which is around 350 thousand, is expected to increase by 45 percent based on the current estimates and business outlook.  

According to a notification by the Road Transport and Highway Ministry, nine lakh government vehicles, which accounts for six percent of CV and passenger vehicles (PV) consolidated sales considering a three-year sales spread, comprising PVs that are older than 15 years, will be scrapped from April 1, 2023. This will lead to incremental demand for cars during the envisaged policy period, and is likely to drive up EV adoption, analysts at Crisil Research have indicated.

Government’s Rail Push and Higher CPSe spending will help MHCV sector
The Union Budget has also upped the spending of Central Public Sector Units (CPSEs) to 6.2 percent of GDP in fiscal 2024 from 5.4 percent on average during the pre-Covid-19 decade. With a 25 percent jump at 2.6 lakh crore which is one of the highest budgetary allocations directed towards major infrastructure-related sectors such as roads and a 50 percent jump in spending of 2.5 lakh crore for railways MCHV sector which supports the movement of goods and freight will see a sharp recovery.

GOI’s Rail push will also spur component manufacturing opportunities for the Indian Railways, said e-bus maker Pinnacle Industries & EKA Mobility, Founder and Chairman, Sudhir Mehta. “The government’s rail push will trigger new opportunities and growth in railway component manufacturing, maintenance and operations systems,” he said.

Mehta who is also the Immediate Past President of Mahratta Chamber of Commerce, Industries, and Agriculture – MCCIA said, “The focus on capital expenditure with promising prospects for the commercial vehicle, green mobility, and railway sector is indeed encouraging.”