B Anil Baliga, Executive Vice President – Bus & Application, VE Commercial Vehicles Ltd.
Interview by: Bhushan Mhapralkar
Q. The Pithampur plant is running at full capacity. How does that augur for buses?
A. We have geared up for a production run of 5500 numbers. We are doing about 6000 to 6100 units. We will be expanding the capacity to take the figure to around 7000 units. We will also be hiking capacity at our bus plant, which is about 25 km from the Pithampur plant. We make bus chassis at the Pithampur plant.
Q. How has been Volvo Eicher’s performance in the bus segment?
A. We have been doing well in the school and staff bus segments. We have been the market leaders in school buses for the last ten years. The staff segment, we have managed to built, and have a 29 per cent share of. Our share of the tourist bus segment and the road permit segment is 10 to 11 per cent. We want to take this share up to 28 per cent. That is the next growth story that we are looking at. Our share in the school and staff bus segment is almost at the level of 28 to 30 per cent.
Q. Aren’t the current permit structures limiting the growth of buses?
A. The (bus industry) is something like a hotel industry. You can’t do without it, and still need it. It does not get affected significantly by the economic downturn. You will find a lot of players jumping into buses. Not that they have a lot of love and affection for it, they are here because it provides great support during the downturn.
Q. Many players have not been able to enter the bus segment. Is it a tough industry to crack?
A. People at Volvo say that if you haven’t got buses you do not know how difficult it is to sell them. Buses as body with chassis are a complex phenomenon. There is a need to look at the chassis part, and the body part. Cumulatively it has to deliver. It is easy to make a truck. To make a bus calls for twice the effort. The challenge lies in meeting the parameters of the customer; the comfort parameters – seating comfort, ride comfort, NVH, etc. The bus should deliver on fuel efficiency. The operating conditions of buses are highly different. A school bus, for example, travels 150 km at different speeds than a route permit bus does. A route permit bus travels at 90kmph until it stops and regains the same speed. Route permit operators ask for quicker acceleration, which changes their fuel consumption pattern significantly. The efficiency pattern changes significantly under such operating conditions. Tyre wear and brake wear are some of the issues that gather significance. Subjected to overloading, the road conditions at times are not good. At 90kmph, a route permit has got its own set of issues, and has to be designed accordingly. In the case of a staff bus, the requirement is for low noise levels. Each bus is so distinct from each other, that the chassis at times differs a good deal. Drivetrain is different. Demand for air-conditioned bus is rising. These buses call for more horsepower. Where 90kW used to suffice, the demand is now for 110kW. Some even want higher output – 120 hp, 130 hp, 140 hp, and more. The market dynamics are changing quickly, and the marketplace is fiercely competitive. The players are grasping for breath.
Q. How do you look at the inter-city bus transport scenario?
A. In the lean period the occupancy level in an inter-city bus would be less than 60 per cent. The ones that are affected the most are the overnight coaches. Route permit buses and others continue. As soon as the economy goes down, the Volvo bus gets affected. Players like Neeta Travels struggled during the downturn.
Q. Does it make it tough for operators of Volvo buses to have a good ROI?
A. Mass market continues to be attractive. ROI is available in the Rs.40 lakh range.
Q. Does it make it lucrative for you where Volvo buses are unable to cut in?
A. Our sleeper coach we are targeting at the Rs.40-45 lakh range.
Q. Aren’t the sleeper coaches an ambiguous territory?
A. The sleeper coach (code) draft has come in. It should be out in the next two months.
Q. Is the socialist agenda relating to buses somewhere affecting their ability to bloom?
A. With the advent of ‘AMRUT’ scheme, the ‘JNNURM’ scheme has gone away. They have made it clear that the allocation for buses has to funded from smart city budgets. Even ‘AMRUT’ does not seem to be moving. Luckily, the STU numbers are going up. The ‘AMRUT’ scheme may not lead to the bus numbers going up, the STU numbers are going up. The needs of STUs are becoming higher. In the last one year, over 14000 STU tenders have been floated. Another tender of 3000 buses is on its way.
Q. What about the city bus undertakings?
A. City bus corporations are in a bad shape except for those like BMTC, which is doing well and getting money from other revenue sources like their malls. They have been efficient and smart. They have been smarter in using their money.
Q. Do you have to educate buyers towards the buses they should buy?
A. From some of the STUs we end up learning from. They know what they want, the performance they want. It is interesting to do business with them. One does not mind giving them two extra features free of cost. Consider GSTC, and they are quite sharp. APSRTC is quite okay. There are others who do not know what they want. Nothing has moved in some states. In one state, nothing has moved for the last two and a half years because there’s no confidence that money will be recovered from the customers. We have a (firm) order for 1500 buses under JNNURM, which is still pending from that state. They have now called us for 528 numbers. For the last two years no private contractor has agreed to come and pick-up the contract. We met some contractors, and their problem is to get the customer to pay. There’s nothing that can be done if the customer does not want to pay.
Q. Are you not looking at the inter-city rear engine bus market?
A. Indian CV manufacturers have been trying to make headway into the high-end rear engine coach market. They have not been successful however. They have made two to three manoeuvres, and will eventually succeed. They have the strength. Volvo is also aware that someday someone will get it right. They are also trying to come out with another range.
Q. In the inter-city arena, how optimistic are you about sleeper coaches?
A. We are highly optimistic about sleeper coaches. Sleeper coaches are selling in huge numbers. I found it hard to imagine that Volvo gave a bodyshell and told the customer to fit it with sleeper coach hardware. Pressure is very high owing to the huge demand for sleeper coaches. We are selling more sleeper coaches than the conventional ones. Sleeper coaches are being registered. The only two states that have been stringent are Punjab and Delhi. The OEMs have had to change to meet the Bus Code. The private buses continue.
Q. How far has the Bus Code penetrated?
A. Bus Code was to be implemented in April last year. They have implemented the dimensions in April (2016). A regulation has been issued a few days back that the Bus Code will be implemented in total from October 01. This shows that the government is clear. We are already helping coach builders. We have accredited them. We give him the design; there’s no Bus Code connection for him. We certify and guarantee that what he makes is as per the specifications. We are accountable.
Q. Are you driving in a new converter (body builder) culture?
A. Some converters have a strong engineering ability. Sometimes their engineering abilities are better than that of an OEM. Some of them are brilliant. Alma Motors, for example, is at the upper end. It is a converter who can convert; has an amount of engineering abilities. We worked with them for a long time. We have done Sri Lanka buses with them. Also, with JCBL.
Q.How many buses do you do?
A. In the peak season we do about 1300 buses a month. We make some 700 of them in our plant and the rest are made by the body builders.
Q. How do you look at the upcoming regulatory change; its effect on the ecosystem in terms of engineering, operation, ownership, etc.?
A. I think that we are grappling with electronics, and internally as well. With electronics reliability goes up, provided the system is designed well and managed well. Regarding the demand for higher uptime, we are already projecting 50000 km as the first target. Eventually it will have to move to 100,000 km.
Is there an amount of Volvo technology trickling into Eicher buses?
Yes, it is. Currently it is limited to engines. Whatever support we need, may it be manufacturing or any other specific requirement, we can avail from them. We discuss issues with them. They provide us with inputs. We closely coordinate with the Volvo bus business. We do their aftermarket work.
Q. How does Eicher maintain its own identity? Especially in the presence of Volvo brand?
A. We have a clear demarcation. We (Eicher) will sell below Rs. 5.5 million, and Volvo Buses will sell above Rs. 5.5 million. There’s a clear understanding that we will not exceed this value and they will not climb below this value. Our benchmark is Rs. 4.5 million, and that of Volvo is Rs. 6 million. Brands like UD are part of Volvo.
Q. Will UD cannibalise Eicher high end products?
A. It is clearly segregated and demarcated. The presence of UD will only aid us to grow.
Q. Are you planning any new product at the lower end of the spectrum?
A. You may see a five-tonne product. Talking about the top-end and the low-end, we have the pipeline full. Focus first and foremost will be on heavy-duty buses – sleeper coaches. AMRUT buses and route permit products. The route permit bus products will take our market share to 25 per cent by 2020. Our focus will be on front-engine bus. We are going to bring NVH on front-engine buses.
Q. Are you not looking at a rear-engine bus?
A. Volvo already has a rear-engine bus. We would like them to leverage that technology. Also, when we look at it from the STU perspective, they are very happy with a front-engine bus. There is a drop in fuel efficiency and the maintenance costs may be higher. Rear-engine placement calls for a bigger water pump and radiators, which have an effect on the performance. Fuel efficiency comes down, and an Indian bus operator is well aware of it. The drop is approximately one to 1.5 km per litre. STUs are aware of this, and they don’t find merit in buying a rear-engine bus unless its an inter-city coach that gets them a huge amount of load. Where private operators carry loads, the STUs don’t do it. They don’t gain by that.
Q. Does ferrying of an amount of cargo make a good supplementary income source for operators?
A. To have 10 cu. m. of storage box on a front-engine bus makes for a tricky design manoeuvre. Our endeavour is to come up with a front-engine bus that offers almost the same amount of cargo space as a rear-engine bus. Storage space in an Indian bus matters. A lot of the operator profitability comes from cargo.
Q. Why do Indian operators seem to take an amount of time to look up to premium offerings?
A. Indian operators are smart. They know their ROI very well. The trick lies in selecting the right route and the right bus. If either of it goes wrong then it could spell trouble for an operator. Unfortunately, there have been instances were the operators have selected a bus and then started looking for a route. Good operators are very clear about selecting a route; if its a human populated route or a cargo route. They are clear about where the money is going to come from. If it is a human populated route, the turnaround has to be high. It is not possible to earn the kind of money a cargo route can deliver.
Q. How do you look at the permit system in buses, and its use by the operators?
A. We recently had a Volvo team visit us. We asked them if the 13.8 m long multi-axle bus was more profitable than a 12 m long bus. They said that there are some routes where the 13.8 m long bus will make profit, and there are some routes where the 12 m long bus will make profit. The problem is when an operator were to buy a 13.8 m bus for a route that is suitable for a 12 m bus. As we got into the heavy-duty bus segment we found out all the merits and demerits after speaking and listening to so many people, we now know where to peg the figure. Figure comes from ROI, and Rs. 4.5 m is the deadline. The period is three to four years. The maximum is four and a half years. An operator will be very keen to get the most fuel efficiency. Everything must be measured, and everyday.
Q. Where do technologies like AMT matter?
A. I look at AMT as the future of buses. An AMT will give better fuel efficiency than a manual transmission. An automatic transmission in comparison is very costly, two and a half times more almost. It also has its own loses. The fuel efficiency of an AMT will be better than a manual transmission any day. We are developing AMTs. You could hope to see them by 2018. An advantage of AMT is that the life of transmission almost doubles. There’s no misuse. We are working with Wabco to develop AMT technology. We are also getting inputs from Volvo. Volvo has I-Shift Amt technology.
Q. How much more would an AMT cost over a manual transmission?
A. If a manual transmission costs Rs.50,000 for example, an AMT would cost around two-lakh rupees. An auto transmission would cost five times more than a manual transmission. The trick is in getting the costs down. The lower we can bring it, the more attractive we can make it.
Q. How are your relations with the suppliers helping you?
A. We have very good relations with our suppliers. We depend on them. Almost 90 per cent of the suppliers are one off. You may be surprised, but the supplier industry for buses does not exist. We have had to create a supplier base from scratch. Today we have about 110 suppliers. Even in a front-engine bus, the similarity of components and sharing has been changing. We have a completely different range of chassis. These come with parabolic suspension; with pneumatic suspension, which is not there in the trucks at all. The chassis is absolutely different from that of a truck. The brakes are different. Operator preferences indicate that they don’t like brake noise. Because of the noise that comes with asbestos free linings, we have had to move over to an imported lining material.
We are highly optimistic about sleeper coaches. Sleeper coaches are selling in huge numbers.