Infra provision may boost commercial vehicle demand: Study

The budgetary provision of Rs 70,000 crore to boost infrastructure coupled with lower fuel costs and reduced interest rates is likely to boost demand for commercial vehicles (CV), Care Ratings has said.
"The Rs 70,000-crore infrastructure push during the Union Budget 2015-16 and passage of the legislation that opened the doors to commercial mining would boost demand for CV in the short-term. Furthermore, lower fuel costs and reduced interest rates would assist demand for CV in FY16," the credit rating agency report said.
However, it noted that sustainable recovery of CV industry would depend on successful implementation of initiatives such as Make In India, Goods and Services Tax (GST) and Smart City, combined with ease of doing business.

"The decision of creating 100 smart cities by 2022 would generate huge opportunity for CV original equipment manufacturers (OEMs) in the long-term. Smart city project on the other hand would aid the organised retail sector to flourish...Which in turn would lead to proliferation of 'hub and spoke' model for transportation and better logistics infrastructure for improving efficiency," CARE said.
According to the report, increasing usage of hub and spoke model would create demand for more light commercial vehicles goods carrier (LCVGC) to effectively redistribute freight from the nodal points to users.
Since the launch of Make in India campaign in September last year, the foreign direct investment (FDI) during October to February has surged by 56 per cent, the report said.

"Global CV giants like Scania Motors and Daimler Motors have already committed to set up projects here and plan to increase exports out of India. The Make in India initiative would not merely push export demand for CV but also improve domestic demand on account of higher industrial output translating into higher freight demand," it said.
With the revival in commercial vehicle demand, the agency expects income and profitability of manufacturers to improve.
"In the-short term, the income of CV manufacturers is likely to improve owing to revival in CV demand," it said.