India’s commercial vehicle industry has had a good year with sales surpassing the pre-pandemic period, but that recovery is threatened by looming risks of recession, higher borrowing rates and consumption slowdown.
The impact of higher interest rates is yet to affect the demand for trucks as enquiry levels and freight rates remain steady, according to the industry participants.
“Demand for commercial vehicles is driven by a combination of factors including replacement cycle and the overall economic activity, and higher interest rates can be justified if those remain strong,” Vineet Agarwal, immediate past president of industry body Assocham, told BQ Prime.
”Since fleet operators couldn’t replace their older vehicles due to the pandemic, they are doing that now, driving demand for these load carriers,” he said.
Yet, the industry is staring at headwinds. The Reserve Bank of India raised the benchmark repo rate to 6.25% last week to bring down inflation. The higher prices of goods and services are threatening to curb consumption with certain product categories already witnessing impact on sales.