CV Manufacturers planning a robust CAPEX

Healthy demand for CVs leads to a planned investment of ~Rs. 5000 crores


India is witnessing a robust CV cycle and the commercial vehicle (CV) makers are in the fray to increase their investments to the tune of  Rs. 5,000 crore for the next two years. This uptrend in the CV space is primarily due to increased infrastructure spending and ban on overloading of vehicles. The CV industry is expected to see a ~8-10% CAGR for the next 3 years.

CV Volume Trend Chart
CV Volume Trend


Why is this important

With the new BS-IV norms commencing in 2020, automakers are now focusing on product development, engine enhancements and technology up gradation.

  • After losing market share in the last five-six years, Tata Motors showed a good turnaround in FY2018 and has planned to invest ~Rs. 3,000 crore in the next two years for new product platforms and further strengthening its portfolio gaps.
  • Ashok Leyland is planning to invest Rs. 1,000 crore over the next two years on debottlenecking its factories and in development of new products.
  • VE Commercial Vehicles will be spending Rs. 500 crore for FY2019 and is keen on steadily growing its share in the heavy truck segment.

Stocks to be impacted

CV manufacturers will be giving preference to higher tonnage trucks due to their better economics, shortage of experienced drivers and stricter implementation of overloading norms. GST-led consolidation of warehousing network across industries will also boost the higher tonnage truck sales.

Tata Motors (CMP: Rs. 311, Market Cap: Rs. 90013 Crores, FY2020 P/E: 6.5)

Ashok Leyland (CMP: Rs. 141, Market Cap: Rs. 41590, FY2020 P/E: 17.2)

Mahindra Mahindra Ltd. (CMP: Rs. 921, Market Cap: Rs. 114498 Crores, FY2020 P/E: 20.4)

Eicher Motors Ltd. (CMP: Rs. 29736, Market Cap: Rs. 81,081 Crores, FY2020 P/E: 25.5)

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