After two years of down cycle, some segments of the domestic commercial vehicle industry are witnessing signs of recovery. Medium and heavy commercial vehicles registered a positive growth during April-July 2015 over the same period last year. Here, we take a look on what will push demand for HCV in India.
A quick snapshot of the commercial vehicle (CV) industry and the economy suggests that industrial growth during April and May has hovered at around 3 per cent slightly lower than the expectations. Wholesale inflation continues to be in the negative territory at (-) 2.4 per cent in June. The continuous decline in core inflation reflects excess capacity and thus lowers pricing power. With the recent dip in international fuel prices and further easing expected based on lifting of sanctions on Iran, it is expected that inflation will continue to remain negative in the coming months. The key risk is going to be the distribution of rainfall in the next few weeks which could lead to a spike in food prices.  The other big positive factor is likely increase in government spending in the coming months and the focus on infrastructure spending. With that, it is expected that the investments will revive now and Reserve Bank may soften the interest rates further. All these factors, according to Rama Rao A S, Senior Vice President – Sales, Marketing, Aftermarket at Volvo Trucks, VECV, augur well for the CV industry.
Talking on the performance of Medium and Heavy Commercial Vehicles (MHCV) segment R Ramakrishnan, Senior Vice President, Product Strategy and Planning and Customer Value Creation, Commercial Vehicle Business Unit at Tata Motors said, “The MHCV segment has posted a positive growth of 19 per cent in FY 2015 while the HCV (16-tonne plus) segment, which accounts for almost half of total M&HCV (truck) sales has been witnessing strong demand (up 42.6 per cent in FY 2015) on back of replacement demand following two years of deferment and capacity addition by organised fleet operators to some extent.” Commenting on the latest market scenario for heavy commercial vehicles (HCV) industry, P Ravishankar, Executive Vice President – Sales, Marketing and Aftermarket at VE Commercial Vehicles said, “The heavy-duty segment looks very positive and is expected to show growth. The most recent numbers of first quarter reflect this trend – almost 40 per cent (39.4 per cent) growth was seen in the heavy-duty segment – from 38,279 in first quarter of 2014 to 53,348 in first quarter 2015.” He adds, “The last two years of downtrend has seen the operators postponing replacement due to low fleet utilisation and also lower resale value. However, the industry has already picked up its pace and growing since April 2014.”
Another HCV manufacturing major AMW Motors agreed that the company is witnessing an uptick in the demand on year-on-year basis specifically in the on-road trucks. According to R N Rao, Director – Marketing of the company, “Off-road vehicles like tippers are still not picking up. Tippers segment has shown a negative growth of around 4-5 per cent year-on-year. Markets like Tamil Nadu, Andhra Pradesh, Mumbai and NCR are showing growth whereas markets like Madhya Pradesh, Rajasthan, Gujarat and Chhattisgarh are still not consistent.”
Replacement driving market growthImprovement in some key sectors, driven by road projects getting cleared, opening up of the mining sector, improvement in cargo trucks partly driven by the tenders for petrochemical vehicles, tankers, LPG products and partly due to the FMCGs, have largely contributed to better MHCV sales. “Over the medium term, the demand for new HCV will also be driven by gradual acceptance of advanced trucking platforms, progression to BS-IV and BS-V emission norms and introduction of technologies such as Anti-Lock Braking System (ABS), which may lead to some advance purchases by fleet operators,” anticipates R Ramakrishnan.
Tata Motors expects the HCV segment to grow steadily, with dependence on pick-up in infrastructure projects and overall industrial activity, all of which depends on the pace at which reforms in land acquisition, mining and environmental clearances are implemented across sectors.
However, P Ravishankar said, “The fall in crude prices and erasing of diesel under-recoveries is good news for transport industry. Post a lag of three years, the industry has started reviving and heavy-duty segment is the first to pick this up.” Fleet replacement has begun already after being almost stagnant for the last two years. “Formal fleet replacement policies towards scrapping of old-age vehicles have boosted the demand for vehicles. Hence, the heavy-duty segment would continue to see a positive momentum pertaining to such factors,” P Ravishankar adds.
The final verdict on National Green Tribunal (NGT) banning over 10 years old diesel trucks continues to shore up the market requirement and industry in northern markets like Delhi NCR, Rajasthan and Uttar Pradesh. “In 4×2 haulage segment, spurt is fuelled by replacement of fleet in 2-wheeler transportation business due to restrictions on over-dimensional superstructures and NGT. Two-wheeler and car transportation replacement demand has also been observed in 35-tonne tractors,” Rama Rao A S from Volvo Trucks explained.
R N Rao of AMW Motors also observed that most of the demands in the on-road trucks are out of replacement demand. He adds, “The buying cycle was stretched by about 18 to 24 months on account of slowdown and thus the vehicles had to be replaced on account of vintage and reliability. Thus the major driving factor today is the replacement demand in the on road truck market.” Ray of hopeInfrastructure and manufacturing growth would be the key drivers of truck market. Around 60-70 per cent of truck sales are accounted for by manufacturing and infrastructure sectors including mining. The last 2-3 years saw stagnation in these sectors, which severely impacted the growth of truck market in India. “The new government is giving focus to these sectors and we expect the turnaround soon. The budget has already proposed growth by building smart cities, which will accelerate growth in core sectors like mining and thus impact HCV sales positively,” believes P Ravishankar from VECV.
Demand for CV is directly linked to the macro-economic environment in the country, and specifically mining and construction activities. The industry expects mining activities to see signs of recovery post monsoons. “We hope that a stable government at the centre will drive reforms to promote investment, develop infrastructure, revive mining quicker, and undertake tax reforms that will definitely help sustain demand in the medium- to long-term, for a real turnaround in the CV industry. Besides this, the fluctuating value of the rupee, fuel prices and financing availability are other key elements,” R Ramakrishnan of Tata Motors said.
Rama Rao A S also believes that the new government at centre has shown strong intent to revitalise the mining sector through initiatives which would provide the much anticipated thrust to mining sector growth. The government initiatives include new ordinance for reallocation of cancelled coal blocks through e-auction ensuring transparency, the new MMDR bill to speed up and stabilise the policy, lift of mining ban in certain states to revive the domestic iron ore mining, allotting non-operational mines to states for commercial coal mining etc.
However, R N Rao observed, “The markets for off-road trucks (i.e. tippers) are definitely not picking up. As the current utilisation levels of available equipment are still an issue, no new requirements are getting generated. The entire mood in the mining and construction space is still of ‘wait and watch’. The matter further gets aggravated on account of financing. Vehicle financing on infrastructure projects and mining are at a very slow pace and lot of banks as well as NBFCs are trimming their CE portfolio.”
Contrary to this view, Rama Rao A S opined, “The mining segment has begun to see the light on the other side of the tunnel. Coal India Limited (CIL) has so far achieved around 12 per cent coal production growth in FY15 with 121.33 MT compared to same period last year. CIL coal production during June was at 38.83 MT against the total off-take during the month was 42.18 MT. Taking cue from the industry, the premium European truck segment which caters to mining also witnessed a growth of 48 per cent.”
Overall market for premium trucks has been typically around 1,200 to 1,500 units a year and majority of these trucks go in to coal and iron ore mining applications. Considering the positive developments in both these sectors, Volvo Trucks – a premium European truck manufacturer expects that the demand for premium trucks will improve significantly in future.
Product innovationAMW’s 2528 Rock body tipper for deep mining operations is a new product offering in HCV space. The product is specifically targeted to cater to the mining of coal, ore and OB. “The product offers higher productivity and better load carrying capacity,” R N Rao informed.
Tata Motors introduced the PRIMA LX range on the company’s PRIMA platform. An ideal solution for surface transportation and heavy mining applications, with a range extending from 25 to 31 tons, and powertrain options of 230 bhp and 280 bhp, the PRIMA LX offers best-in-class comfort – right from cabin features, power-to-weight ratio, safety aspects, advanced technologies, built, material quality and reliability, with a low total cost of ownership.  According to R Ramakrishnan, the uniqueness of the Tata PRIMA family of M&HCV is that it focuses on driver comfort – an Italian designed cab, engine technology from the USA and Europe, gearbox expertise from Germany, chassis frame know-how from Mexico, sheet metal dies from Japan and Korea, combined with Swedish precision on a robotic weld line.
VE Commercial Vehicles has recently launched Eicher Pro 6000 Series in the heavy-duty segment. The product has been developed and manufactured as a result of the synergistic working between the Volvo Group and Eicher. “The Eicher Pro 6000 Series is the range of next-generation heavy duty trucks that go beyond high reliability, performance and productivity and have set new benchmarks to deliver – best-in-class fuel efficiency, superior productivity and enhanced driver efficiency,” said P Ravishankar. VECV plans to strengthen its heavy-duty trucks portfolio with the launch of Eicher Pro 8000 series in the coming months.
Volvo Trucks claims to have created the market for premium European trucks in India. The company has around 60 per cent market share in this segment. I-shift for mining, a new introduction with VECV’s new FMX, plays important role to ensure that the engine’s capability reaches to the ground effectively and efficiently. This is particularly important in rough conditions and where a lot of manoeuvring is involved. Also in mining lot of gear shits are required due to continuous changes in the terrain. Besides this, driving continuously on the same route adds to the driver fatigue. I-Shift allows the driver to relax a little and let software do some of the work. “It increases the driver productivity by reducing the driver fatigue as the driver now has to only focus on manoeuvring,” says Rama Rao A S.
Volvo Trucks plans to offer Dynafleet Online which is a telematics solution for efficient fleet management constantly giving up-to-date information about trucks. Through its two services available in India – “Fuel & Environment” and “Positioning”, customer can see in real time vehicles’ performance data and the current location of their vehicles, respectively, that are critical to have control on their fleet.________________________________
The entire mood in the mining and construction space is still of ‘wait and watch’. The matter further gets aggravated on account of financing.
R N Rao, Director – Marketing, AMW Motors Ltd_________________________________
The demand for new HCV will also be driven by gradual acceptance of advanced trucking platforms, progression to BS-IV and BS-V emission norms and introduction of technologies…
R Ramakrishnan, Senior Vice President, Product Strategy & Planning and Customer Value Creation, Commercial Vehicle Business Unit, Tata Motors_______________________________
In 4×2 haulage segment, spurt is fuelled by replacement of fleet in 2-wheeler transportation business due to restrictions on over-dimensional superstructures and NGT.
Rama Rao A S, Senior Vice President, Sales, Marketing, Aftermarket, Volvo Trucks, VECV_________________________________
Post a lag of three years, the industry has started reviving and heavy-duty segment is the first to pick this up.
P Ravishankar, Executive Vice President Sales, Marketing & Aftermarket, VE Commercial Vehicles