LCV segment to grow at 10-13% over next five years, says ICRA

Mumbai, Jan 12 (PTI) Rating agency ICRA today said theIndian medium and heavy commercial vehicle segment is likelyto grow between 9.5-11.5 per cent and light commercial vehicle(LCV) space between 10-13 per cent over the next five years.

The growth is likely to be higher in the upper end ofthe medium and heavy commercial vehicle (M&HCV) segment and inthe lower band of LCV, ICRA said.

While in the past, the international original equipmentmanufacturers (OEMs) were unable to make a major dent in thedomestic CV market, they have now ventured in through jointventures (JVs) with some of the domestic players, therebyraising the prospects of increasing competitive intensity, therating agency said.

Some of the JVs are likely to benefit from the in-depthunderstanding of the domestic market that the local playershave their established vendor base and their extensivemarketing and distribution reach.

Nevertheless, the incumbents, to defend their marketposition, will continue to draw strength from theirestablished brand franchise, extensive service anddistribution network and competitive cost structures, itsaid.

The strong recovery witnessed in the domesticcommercial vehicle (CV) sector in the second half of thefinancial year 2009-10 has continued in the current fiscalwith the April-November 2010 period reporting a growth of 35.2per cent over the corresponding previous year. .

The growth in the medium and heavy commercial vehicle (M&HCV) segment has been stronger at 47.4 per cent, ascompared with the light commercial vehicle (LCV) segment,which reported a 25.8 per cent growth during the same period,the agency said.

"The medium to long term outlook for the domestic CVindustry remains robust, given the expectations of strongeconomic activity and infrastructure development, besides theinter-segmental shift. However, the sharp growth in volumesthat was witnessed during the last 6-7 quarters may moderateto an extent in the short term," ICRA Senior VP & Head-Corporate Ratings, Subrata Ray said.