Speaking to CNBC-TV18, Vinod Aggarwal, MD & CEO of Volvo-Eicher Commercial Vehicles (VECV), emphasised the resilience and potential of the commercial vehicle sector. While 2024 saw a modest decline in sales—particularly in heavy-duty trucks, light and medium-duty trucks, and small commercial vehicles—the bus segment emerged as a surprising growth driver with a 20% uptick. Aggarwal pointed out that tonnage-wise, the industry has grown due to a shift toward high-capacity trucks, such as tractors and tippers.
Looking ahead, Aggarwal is optimistic about 2025. “Fundamental factors like infrastructure investment, robust replacement demand, and growth in core industries such as coal, steel, and cement will fuel the commercial vehicle segment,” he noted. He anticipates that the government’s capex push in the last quarter of FY25 will bolster demand, supported by substantial tax collections and manageable fiscal deficits.
Meanwhile, Sai Giridhar, Vice President of the Federation of Auto Dealers Association (FADA), offered a cautiously optimistic outlook for passenger vehicles. He noted that while 2024 witnessed double-digit growth overall (11%), the passenger vehicle segment lagged with a modest 5% growth due to high base effects from previous years. However, two-wheelers emerged as a silver lining with a strong 13% growth.
Looking ahead to 2025, Giridhar foresees a “mixed bag” scenario, contingent on economic conditions and the success of new launches, particularly in the electric vehicle (EV) segment. He highlighted the growing electrification trend, emphasising the need for enhanced infrastructure to support EV adoption. He said that two-wheelers are expected to continue their growth momentum, while passenger vehicles may sustain single-digit growth.
BVR Subbu, former President of Hyundai Motor India, delved deeper into the EV landscape. He noted a 30% year-to-date growth in the segment in 2024, with two-wheelers leading at 37%. However, electric cars continue to lag. Subbu anticipates a doubling of the two-wheeler EV market in 2025, with significant gains in three-wheelers as well.
While EV adoption has progressed, challenges remain, particularly in the car segment. Subbu predicts that electric cars will remain a niche category in 2025, with two-wheelers driving most of the EV momentum.
Edited Excerpt from the Discussion.
Q: Let me begin by asking you about commercial vehicles. Often, the truck sales in the country are said to be the barometer of the health of the economy. How do you see the commercial vehicle segment doing so far? We’ve seen a decline in sales of about 6% if we speak about November. How do you think the full FY25 will be for the commercial vehicle sector?
Aggarwal: If you look at the overall commercial vehicles till November, the industry has not done as well as we had expected. We had expected that the industry would grow this year, but it is down by around 2%-3% in the first eight months. And if you analyse it further, the growth has also been based mainly on growth in buses. Buses have grown by 20%, heavy-duty trucks have dropped by around 8%, light and medium-duty trucks have fallen by around 5%, and small commercial vehicles have dropped by around 2%-3%.
So, buses have led this entire recovery in the industry, and based on that high growth, there is still a drop overall.
However, there is another cut. If you look at the tonnage-wise, even though the heavy-duty trucks, last year it was 2,57,000, as against earlier peak of 2,95,000. If you convert these numbers into metric tonnes, then in 2018-2019, it was around 9.7 million tonnes of payload of 2,95,000. Last year, 2,57,000, it will be around 10 million tonnes. So therefore, tonnage-wise, there is growth because there is a lot of migration that we have seen into high-tonnage trucks like tractors or tippers, which are high-capacity trucks.
Therefore, I will not say that there is much concern. There are some specific reasons why the industry has been a bit muted this year. However, going forward, we are very optimistic because some specific fundamental factors will continue to lead to growth in the overall commercial vehicle industry.
The foremost factor is the continuing investment in infrastructure. Our economy is growing, even though the growth rate has slightly declined. But still, we are expecting next year also growth of around 6%-7%. And then the replacement demand is going to remain very, very strong. So, based on these fundamental factors, we expect that the balance of four months of this year is likely to be much better compared to whatever we have seen in the first eight months.
In the first eight months, the government’s investment in infrastructure was not as substantial as it should have been. However, they will make up for the balance of four months. You will see much more activity in the economy, especially in infrastructure investment, because the government capex budget is very high.
Q: If we were to ask you about the union budget, what can the budget do? You said the government’s capex spending will pick up in the last four months of this fiscal. Having said that, what kind of capex push or measures are you hoping for that could give impetus to the commercial vehicle industry?
Aggarwal: If we look at the government finances, we see that they are doing better. So they can invest. The tax collections are all right; we are getting very handsome monthly collections of GST. There has been good growth in the direct and advanced tax collections. And, of course, the fiscal deficit will likely remain under control. Therefore, the government will have good capacity to continue to invest. So, we expect that even next year also, the government should continue to invest in the infrastructure. There is still a lot more to be done in infrastructure.
If you look at our other core industries that will lead the overall economy, such as coal, steel, or cement, all three sectors will likely grow very well next year.
This year, coal production has crossed 1 billion metric tonnes. And next year, we expect at least 10% growth in this because more and more mines are also opening up. Even the cement and steel, if you look at the companies’ plans, there are many more expansion plans the cement and steel companies have announced because, with the investments in infrastructure and real estate housing sector, you will see these core sectors growing when the core sectors grow, that also leads to the growth in the commercial vehicle industry.
Q: The month of November was not up to expectations per the FADA statement. What’s your outlook for the full year as we end 2024? Do you expect 2025 to be better for the auto industry, specifically for passenger vehicles and two-wheelers?
Giridhar: As far as 2024 is concerned, we expect double-digit growth for the entire calendar year. Suppose we consider that from January to November, we already have an 11% growth, to be specific. Two-wheeler is a silver lining in the sector. It’s already shown a growth of close to 13%. Three-wheelers also have a double-digit growth of approximately 12%. Passenger vehicles are a bit of a challenge. It’s still in a single-digit growth, above 5%. But if you look at the base from which these figures are coming as far as passenger vehicles are concerned, we’ve seen that the last three years have been robust as far as passenger vehicles are concerned. So, the base was very high compared to previous years. So even if you consider the base, we still have a single-digit growth of approximately 5% odd, which, overall, we see as decent and good growth. At the start of the year, we predicted that passenger vehicles would be a single-digit growth. Overall, the industry will grow by approximately double-digit. So that’s what we are looking at.
If you talk about 2025, next year would probably be a mixed bag. So, we’ll be dependent on the economic conditions and on the new launches which are there.
We’ve seen a lot of OEMs lining up to launch their electric range of vehicles, be it two-wheelers, three-wheelers, four-wheelers, or even commercial vehicles. There are a lot of cars which are to be launched. I think how well the consumer accepts these electric vehicles is one factor to be seen.
Infrastructure is also one of the major factors that might affect electrification going forward because we still see a lot of lacking infrastructure. In fact, in the PM e-Drive, much emphasis is placed on the electrification infrastructure.
But overall, we see the two-wheeler segment growing even stronger as far as 2025 is concerned. And passenger vehicles, to be specific, we again see single-digit growth for the entire 2025.
Q: If we were to ask about electric vehicles specifically, strong growth in 2024. It’s a good 29-30% uptick on a year-to-date basis. Good performance so far. Do you expect sales numbers to be significantly higher with new segments being added under the PM e-Drive scheme?
Subbu: When you look at that 30% number, break it up and look at the segments. So, you’re seeing that two-wheelers have probably grown about 37%. You had three-wheelers growing at about 20%. But you had cars as the laggards in the whole picture. And I think that is something that will continue even during 2025. , I expect to see in 2025 is probably 100% growth in the two-wheeler business—maybe 15%-20% growth in three-wheelers. And I think electric cars will continue to be just a footnote in the overall scheme of things. I don’t see them growing any further than that.
If you look at two-wheelers, what’s happening is that there’s been considerable localisation, which has ensured new product configurations and new price points. Therefore, many new consumers are coming in, and companies have gone across geographies. They’ve moved beyond the cities. I would imagine that in the top 10 markets for two-wheelers, I would expect that maybe 4 out of 10 scooters would probably be electric scooters today.
You would see that when motorcycles come, the fun starts.
Watch the accompanying video for the entire discussion.
