Commercial vehicle (CV) sales are at full-throttle. Monthly sales in May of the top three manufacturers zoomed by about 50% year-on-year (y-o-y) after an equally strong show in April. Even the full-year sales in FY2018 were higher by 25.3%, albeit over the low base of the previous year. All this euphoria on the Street has masked the classical cyclicality risks such as unabated fuel price rise and hike in interest rates that may challenge the skyrocketing CV growth rates. Since April 2017, the price of diesel has surged by 20%.Add to this the central bank’s move to increase interest rates after about four years, which will increase the cost of borrowing for non-banking financial companies (NBFCs)—the lifeline of finance for CVs. Any pressure on truck rentals for a longer duration may soften CV sales growth.

(Live Mint)