ICRA cuts growth forecast for domestic PV sales to 7-8%

New Delhi: Ratings agency ICRA Monday revised downwards its growth forecast for domestic passenger vehicles sales to 7-8 percent for the ongoing fiscal, citing sluggish customer sentiments due to high fuel prices and rising interest rate.

ICRA, which had earlier projected a growth of 8-9 percent, however, maintained stable outlook on domestic passenger vehicles (PVs) industry for the year.

The domestic PV sales has slowed down to 6.1 percent during the first seven months of the FY2019, amidst sluggish customer sentiments due to high fuel prices and rising interest rate, ICRA said in a statement.

"Moreover, factors like floods in Kerala (during peak Onam season) delayed festive season and high base of Q2 FY2018 also weighed on overall growth rate during Q2 FY2019 resulting in domestic wholesale PV dispatched declining by 3.6 percent," it said.

ICRA further said, "Accordingly, the growth estimates for the PV industry has been revised to 7-8 percent in FY2019, from earlier guidance of 8-9 percent."

The ratings agency said despite subdued growth, the credit profile of most PV original equipment manufacturer (OEMs) remains strong, supported by healthy cash accruals and financial flexibility provided by strong parentage.

The overall capacity utilisation level in the industry remains modest, it added.

On the commercial vehicles front, ICRA said demand for medium and heavy commercial vehicles (M&HCV) truck has remained "indifferent to revision in axle load carrying norms, thereby reflecting a healthy underlying demand"

The M&HCV truck segment is estimated to grow between 18-20 percent in volume terms during FY2019 and witness a healthy growth in FY2020 as well, on back of implementation of BS-VI emission norms from April 2020 onwards, it added.

The light commercial vehicle (LCV) truck segment is expected to register a growth of 18-20 percent in 2018-19 stating that tightening of financing environment could derail the growth momentum in the near-term.

The segment has been on structural uptrend riding on healthy demand from consumption-driven sector as well as replacement cycle, it added.

In the bus segment, ICRA growth is expected to recover in 2018-19 aided by replacement-led demand following a year of sharp contraction in sales.

"The same is estimated to grow by 12-14 percent in the current fiscal," it said.

While maintaining stable year-end outlook for both PV and CV segments, ICRA said the CV segment is expected to post faster growth as compared to the PV segment.