 "Commercial vehicles drive out of slowdown")
These orders exemplify a dramatic turnaround in the demand for medium and heavy commercial vehicles (M&HCV), a segment that was gasping for air till recently. According to the Society of Indian Automobile Manufacturers, M&HCV sales grew 15 per cent to 203,926 units during the April-February period against 177,185 units in the same period in 2013-14. Significantly, growth of nearly 40 per cent in sales was recorded in the October-February period: 99,722 units compared with the 71,695 units sold in the same period in 2013-14.
With these numbers, there's finally some optimism among M&HCV makers after two years of consistent decline in sales. And though the industry is still 28 per cent below 2010-11 levels - the current growth figures highlight this low base effect - manufacturers who were forced to shut down plants, retrench workers and go slow on new product development to cut operating losses are not complaining.
Says Ravindra Pisharody, executive director, Tata Motors: "The recession was quite prolonged in the M&HCV segment: nine quarters in a row. Now fleet replacement has kicked up the demand; big fleets that were delaying purchases for 2-3 years have jumped back in. The moment they saw some good economic signs, they started replacing their trucks."
What's driving sales?
Analysts say this optimism is founded on assurances of sustained infrastructure spending. Among factors positively impacting demand for commercial vehicles are the announcement that the Railways will spend Rs 8.5 lakh crore over the next five years, an acceleration in the construction of the east and west dedicated freight corridors, highway construction targeted at 104,000 kilometres in five years, and the implementation of the goods and services tax to support efficient supply chains.
The slowdown in the economy had led fleet operators to postpone purchases. Vehicles that were supposed to be replaced after five years were made to run for seven years or even more. And then, because low agricultural yield had affected the demand for transport for farm produce, truck rentals on trunk routes could not be raised despite diesel prices increasing by 50 paisa every month till the fall in crude prices in the latter half of 2014.
"At least, more enquiries are getting converted into sales now," says a relieved dealer. "As long as this continues, we do not mind giving discounts." In a desperate bid to woo buyers, manufacturers had offered discounts of up to Rs 1.8 lakh. And while, the discounts levels have not gone down significantly, they have corrected to an extent, say manufacturers as well as dealers.
However, there are people like Umesh Revankar, managing director, Shriram Transport Finance, who point out that replacement of old vehicles alone won't sustain sales. "You need demand from infrastructure, haulage and mining sectors," he says, before adding, "If the demand continues post April, then it will be strong going for M&HCVs." The financier is upbeat because it has noted that the increase in excise duty since January 1 has had no significant impact on the demand for commercial vehicles.
The lacklustre sales notwithstanding, most manufacturing companies did not postpone their new launches in the two dismal years, with new products from Daimler India, Tata Motors, Ashok Leyland, Scania, Volvo and VE Commercial Vehicles hitting the roads. Tata Motors' sustained effort in retaining its clientele helped it avoid erosion in its market share in the M&HCV segment, which stood at 55 per cent in April-February. It is now looking at launching 100 products in the category over the course of 2 to 3 years with an outlay of Rs 1,200 crore.
Ashok Leyland improved its share to 28 per cent at the end of February 2015 from the 25.5 per cent it had recorded in February last year. VE Commercial Vehicle, the joint venture between Volvo, the world's largest truck maker, and Delhi-based Eicher Motors, saw a minor correction in share to 11 per cent from 12.5 per cent, according to SIAM data.
Still, the company has ambitious growth plans. Siddhartha Lal, MD and CEO, Eicher Motors, said in his company's latest annual report, "We have launched the Pro series trucks in heavy duty segments - Pro 6000 and Pro 8000. By the end of 2015, the Pro series range will be available across all our distribution points in the country." He added that the joint venture with Volvo will see an investment of Rs 500 crore in 2015, mainly for commercialising new products.
New-kid-on-the-block Daimler, with its Bharat Benz brand of trucks, managed to wean away some customers from competitors. The German company remains reluctant to share annual sales data.
A new launch is not the only strategy being adopted to cash in on the new customer enthusiasm. Tata Motors, for one, is also pushing for truck racing in the belief that such an event will not only take the truck marketing campaign to a different level, but also lead to innovation in product development. It could be on a good run here: 48,000 people turned up for the Prima Truck Racing at the Buddh International Circuit in Greater Noida on March 15 against the 20,000 in the inaugural race last year.