Industry Trend Analysis - Infrastructure, Mining And Agriculture To Fuel CV Sales - APR 2018

BMI View: Solid growth in India's construction, mining and agribusiness sectors will help drive an 8.6% expansion in new commercial vehicle sales in India in FY2018/19.

We forecast total commercial vehicle (CV) sales in India (given the lack of data availability for a breakdown by segment) to grow 8.6% in financial year (FY) 2018/19 (April-March), reaching a total of around 814,000 units. Furthermore, we forecast domestic CV sales to average annual growth of 8.5% over our FY2018/19-FY2022/23 forecast period, reaching a total of 1.1mn units by the end of FY2022/23. This demand for CVs will be driven by robust growth in the country's mining and infrastructure sectors, which will create the supportive market for both light commercial vehicles (LCVs) and heavy truck sales over the next five years. This robust demand will bode well for automakers Ashok Leyland, Mahindra & Mahindra and Tata Motors whom combined controlled 88% of the domestic CV market in the first nine months of FY2017/18.

Positive Growth Outlook For CV Sales
India - Commercial Vehicle Sales, Units
e/f = BMI estimate/forecast. Source: SIAM, BMI

Our Infrastructure team forecasts real growth of 6.1% in 2018 and average annual growth of 6.4% over our 2018-2022 forecast period for India's construction sector. This will be supported by increasing government and private-sector investments in infrastructure development and residential and non-residential buildings ( see 'Strong Construction Growth To Be Sustained' March 6). According to our Infrastructure Key Projects Database - a comprehensive catalogue of construction projects taking place within a country - there are currently 88 infrastructure projects at the planning stage in India across the previously mentioned sectors that are set to be completed over our FY2018/19-FY2022/23 forecast period. We expect this high level of construction activity to help drive demand for both LCVs and heavy trucks that are needed to meet the logistical requirements of these various projects.

Strong Construction Growth Ahead
India - Construction And Infrastructure Growth Forecasts
e/f=BMI estimate/forecast. Source: Reserve Bank of India, BMI

In addition, our Mining team expects India's mining sector to experience solid growth, primarily boosted by the country's positive reforms, vast mineral reserves and improving commodity prices. This will result in strong production growth in the aluminium, refined copper and refined zinc sectors over the coming years. We forecast growth of 12.4% in India's mining sector in 2018 and growth at a rate of 9.6% per year to 2022. We expect this positive outlook for the mining sector to support an increase in demand for heavy trucks in particular which are used to meet the logistical requirements of heavy industries.

Mining Sector To Experience Solid Growth
India - Mining Industry Value
e/f = BMI estimate/forecast. Source: UN Data, BMI

Finally, we expect a positive view on the outlook for India's agribusiness sector to provide additional tailwinds to CV demand. Our Agribusiness team believes that production growth of various commodities will be driven by strong government support and robust demand growth for manufactured foodstuff, leading to average annual growth of 4.8% over the 2018/19-2021/22 seasons for the country's agribusiness sector ( see 'Rising Budget And Reforms To Support Long-Term Sector Growth', February 7). This will bode well for CV demand as it will create demand for these vehicles to help transport agricultural produce.