← External Forces: Industry Specific (all topics)
CV & freight cycle sensitivity
What it is
Commercial vehicle finance demand follows freight availability and rates, which track industrial output, construction and agricultural movement. Operators buy trucks when freight rates justify the EMI
The cycle is sharper than GDP and turns before it
Impact on industries
- Asset quality deteriorates fastest in a freight downturn, since a single-truck operator has no other income to service the loan
- New CV finance volumes collapse in a downcycle, so growth and credit cost worsen together rather than offsetting
- Used-vehicle finance carries materially higher yields and is counter-cyclical - operators buy used when they cannot afford new
- Repossession and resale infrastructure turns default into recovery, so loss given default is far lower than in unsecured lending
- Rural and monsoon sensitivity compounds it, since agricultural movement is a large share of freight demand in many geographies