Commercial vehicle sector relatively better placed; expect sales to hit 8 lakh in FY22: Eicher Motors

India’s auto industry has shrunk by 15 percent compared to three years ago, but grown 10 percent over the last year. However, it’s not the end of the road for the sector in terms of challenges as high raw material prices and chip shortage issues continue to plague the industry.

To understand where the sector is headed, CNBC-TV18 spoke to Sunil Bohra, Group CFO at Minda Industries, and Vinod Aggarwal, Managing Director & CEO - VE Commercial Vehicles at Eicher Motors.

Aggarwal of Eicher Motors confirmed that there’s been a good recovery in the commercial vehicles industry this year. He explained that the commercial vehicle (CV) sector had dropped significantly in the last 3-4 years and is now relatively better placed.

"The CV sector is relatively better placed and since the CV industry had dropped significantly in the last two to three years, therefore, the industry was at rock bottom. As a result of that, and due to a lot of pent-up demand, this year, we have seen very good recovery in the CV industry," he said.

Aggarwal expects commercial vehicle sector sales to rise from 6 lakh units in FY21 to 8 lakh units in FY22.

"In 2018-2019, it was more than 11 lakh including exports and now this year, we are expecting that it should be more than 8 lakh. So we are going from about 6 lakh in FY21 to about 8 lakh in FY22," he said.

He expects positive numbers in FY23 despite inflation and supply-side issues. However, for transporters, fuel costs are being a big deterrent, he mentioned.

"Single biggest silver lining is that the industry is growing, and there is a lot of pent-up replacement demand. And the biggest challenge is going to be inflation and availability of some of the parts like semiconductor shortage. So that's the biggest challenge. But overall, I think the industry should be able to meet this challenge and the industry should still grow in spite of all these challenges," he said.

"All the transporters are under tremendous pressure because of the oil prices, because of the significant increase in the fuel prices since last one-and-a-half years; I think their margins are under tremendous pressure, because they have not been able to pass on the cost increases to their customers," he added.

Bohra of Minda Industries, said that the demand for private vehicle (PV) segment remains robust.

"The current demand for the quarter is a mixed bag. So we all know the challenges which we have been facing the two-wheeler segment because of the demand constraints and from the PV side, while the demand remains robust, we have issues on our shoulders which is on the semiconductor side. PV – we do expect things to normalise, and going forward, we expect this demand robustness in PV segment to continue," he said.