VRV Sriprasad, Managing Director, Volvo Buses India

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Article by: Bhushan Mhapralkar

Pragmatic and optimistic


Q. What is your view on India’s people transportation scenario?

A. Buses have less capital outlay when compared to Metro and Mono-rail. Doing business with the government involves a lot of processes. There are the accompanying challenges. Looking beyond, both the modes of transport – public and private have so much scope for improvement. We are ready to meet the challenge. Speaking about public transportation, there is a need to modernise it. Public transport needs commitment and has to be labeled as a societal thing. It will affect the economy. While we sharply believe in the India story, it has been documented that people have left their vehicles and taken to public transport because of Volvo buses. In a span of four to five years we have come to have a presence in 30 cities.


Q. What is your outlook of the Indian market?

A. Both, private and public fleet transportation has to happen. They are independent, and we can’t simply say that let those who are travelling from Bangalore to Hyderabad have good coaches, and those travelling in the cities can suffer. No. that should not be the case. And it is therefore that there is ample scope for improvement and modernisation. This will be borne by new buses, and therefore the need for new buses. In terms of an outlook, I would say that we run a business. We are therefore pragmatic. When we sense that there is some triggering of the economy, we see the need for people to travel more. We align ourselves, and are ready to meet the demand that comes up. Personally, if you ask me, I am eternally optimistic. It is therefore, that we have invested so much. I would be happy to double, triple and quadruple capacity.


Q. So, you have invested the entire Rs. 400 crore in India already, starting 2011?

A. We have not said specifically that we are going to put Rs.400 crore in a certain timeline. We have started investing from 2011, and that is again a journey which is on going. So far, the number that we have given is, in this last four years, around Rs.400 crore or a bit more has already been invested. We continue to invest, and not draw a line. We are not drawing a line, and saying that its done with.


Q. Are you pinning your hope on 100 smart cities. Will they provide a drive for growth in buses?

A. It is a very good initiative. If you look the world over, when a city is termed as a smart city, there’s no smart city that has not included ‘smart’ public transportation, and has made it an integral part of the definition for a smart city. We are certain that the policy makers of our country have factored that, and that transportation is integral to the definition of a smart city. We are also anxious to hear from the government about what they outline a smart city to be like. There will be substantial part of public transportation in making that city smart. There’s a big opportunity.


Q. When do you see the market for heavier buses picking up?

A. It should have picked up three years back. So, we are waiting. We need to mix pragmatism with optimism. There is no reason why we should not start picking up. We need one small trigger. The smart city perhaps. In the next budget if they clearly say that this is the definition of the smart city, and smart city means public transportation, we will have emission and noise control; we will protect the environment, and will make it a very nice place, then the need will be to look at what kind of buses are needed. The first priority would be to avoid private transportation. Then we will look at various modes of transportation, and then decide upon the kind of buses that will be needed. We have been a part of such endeavours, and are a part and parcel of many smart city programmes in other parts of the world. We are ready, and whenever the government decides, we are ready.


Q. What is the feedback on UD buses that have gone on trial with the Bangalore city transport undertaking?

A. We continue to expect orders. Our job is to keep expecting orders from all those that we deal with. So far, the trial has been successful, and we have received a positive feedback. It may be vey early to speak because the life of a bus is one-million kms. The buses clocking 1000 km may make it too early to speak about them. We will continue with the processes. Two vehicles (UD buses) are undergoing trial with BMTC in Bangalore.


Q. When do you plan to ship buses to Europe?

A. We will begin shipping buses to Europe very soon.


Q. You are offering UD buses, and have begun exporting Volvo buses to Europe. How are you managing such synergies at the manufacturing level? How flexible is the line?

A. As long as we gear up all our capabilities to meet the high end then we don’t need to talk about flexibility meeting something at the lower end. Only when we have a low-end thing then stretching it to deliver something at the high-end is a problem, and where we have to speak about flexibility. Here we have designed, trained and equipped ourselves on the production line to be globally on par. The export oriented buses and those for domestic consumption follow each other on the assembly line. We do not have a parallel line.


Q. What interiors do the export buses possess? What kind of orders have you got?

A. The buses for export are customised. They are customised based on the specifications. In their development process we involved customers. It is not a surprise for them therefore. They have seen the build of the vehicle. They have seen the protos. Customers themselves have suggested. As far as orders are concerned, only because the customers ordered we made the bus. We have an order, which is why we made the export statement. It is not just that we have made a bus and want to export it is why we announced the export of buses to Europe. The segment that these buses will go to is spread across Europe. Possibly not Eastern Europe. The entire European marketing team is working on this as far as I know. So, its not confined to any specific country. The annual number of 5000 is a big number. The segment operates in the 100 to 300 kmph range.


Q. Who would be the competitors for the Europe bound bus?

Daimler, Iveco, and a lot of local European homegrown brands.


Q. Is the Europe bound bus a multi-axle design? Would they look different from the Volvo buses in India?

A. It is a single-axle design, and will look like the Volvo buses in India. We need to understand that we are on par with Europe in many things. There is no need to think that they are something different. The fit, finish and reliability are important.


Q. What was the feedback you received from the potential customers who came to see the bus?

A. We had some very good customers and stakeholders who are involved with the bus industry, who gave us feedback. We benefitted across various areas. And it is not that we have not taken an Indian customer to the factory and asked for his feedback. We will benefit from his feedback. Every new person has a perspective. If he is genuine, he gives us feedback, which is always useful.


Q. How localised is this bus?

A. The bus body is 100 per cent localised. The driveline is imported because it is a Euro 6 design.


Q. Are you looking at regions beyond Europe?

A. We are already into SAARC countries; into South Asia and South Africa. As and when we look at an opportunity we may want to reach out to a new market. There is a need to understand that markets differ, and there is therefore a need to develop and invest for specific market needs.


Q. What improvement have you seen in the Indian supplier base?

A. Our supplier base, I think, is grossly underestimated. The minute Suzuki came into this country, the auto supplier base started increasing. Today, we have almost all the global manufacturers making vehicles in India and exporting it to Europe, US, etc. Many suppliers in the auto space are common to supplying car and CV components. Some of the suppliers are doing more business with global companies outside of India rather than in India. For example, Bharat Forge, TVS Group, etc. TVS Group company, Sundaram Fasteners was the first Indian company to get ISO 9000 certification. They are the first company to have secured a 100 per cent supplier status with General Motors for radiator caps. Any GM vehicle made anywhere in the world will feature a Sundaram Fastener radiator cap. This radiator cap was made in India, and at Chennai. As a country we can be proud of our supplier base.


Q. Which other city transport undertaking apart from BMTC that you are dealing with?

A. 30 cities are using Volvo city buses. We recently delivered around 100 buses to Kerala. In Kerala, they connect every town and city.



We are also anxious to hear from the government about what they outline a smart city to be like.

Marc Llistosella, President & CEO, MFTBC, and Head, Daimler Trucks Asia

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Article by: Gianenrico Griffini

Marc Llistosella, President & CEO, MFTBC, and Head, Daimler Trucks Asia

Interview by: Gianenrico Griffini

Higher horsepower


Q. Last year you spoke about scaling up production every month. Did you achieve the expected result?

A. To be very honest, we failed to achieve our set targets. We expected to do better as the market forecast was promising. The markets however went up by just 12 per cent. For a market like Europe, this might be good. But, since it was dropping more than 45 per cent in the years before, it required to bounce back with growth hovering around 60 to 70 per cent to return to where you started. The market was in our favour in 2010-11 for 9-tonne plus vehicles at 280,000 units. In 2014 it went down to 171,000 units. There was deterioration of 1,10,000 units, which is equivalent to 35 per cent when compared with 2011 figures. The net price that we had in December 2010 is what we have today. So the overall impact is not limited to volumes, but is also in pricing. The nominal pricing includes inflation too. Our competitors are technically selling trucks at a price, which is 20 per cent lower than what it was in 2011. This is something that we had never imagined. In heavy-duty vehicles, we have an average discount of 20 per cent. In medium-duty vehicles, we have a discount of 12 to 14 per cent, which exceeds the discount plan that we had planned. We had never expected this kind of continuous discount levels. At the other end, we grew in the first quarter. This was confirmed in April through 63 per cent BharatBenz sales. This is roughly 12.5 per cent, which is a good performance. But the market is not letting us live easy. There’s not a single day when there’s tailwind. For three years, we have only got headwind, and it’s been a fight for survival. We wish that there is a normal market like in 2010-11. It’s high time that we talk about 8 to 9 per cent market share and immediately touch the 20 per cent mark. I was always clear that I needed the best quality here, but it is now so competitive that our trucks are bought by Hino, dismantled and tested. We were earlier targeting Tata Motors and Ashok Leyland, but now these trucks will compete with Scania and Volvo as well. That is a little bit more than what we had ever hoped for.


Q. What do you expect at the end of this year?

A. I would say that we should stay with our 60 per cent, but I expect more. I think the market will stabilise at a level of 190,000-200,000 units, which is still far away from what this market can actually achieve. I hope that the current government will tackle the obstacles, which are blocking the market from flourishing. GST must be brought in, transportation must be eased, investments in infrastructure must be accelerated. It is not the time for talking now, it is time for action. In just five years, China revamped its highway system, which is phenomenal. If China can do it then we should also think on similar lines quickly. Though we are the second largest democracy in the world, there’s still a long way to go. When Gujarat can do it, every other state can. There are some states in India, which are pretty close to some African countries, and there are some other states, which can compete with Asian neighbours. India can, if it has the will power.

Q. With a new 430 hp truck, are you targeting only the mining side, or also an escalation of the engine power in India which generally prefers low power trucks?

A. We are promoting a balanced upgrade of horsepower. If you notice, some of the 30-tonne vehicles have an engine capacity of 180 hp. The torque does not exceed 600Nm. This is risky; fuel consumption will be totally inferior, speed and turn around time will be affected. So we have to bring in a balanced form, which fits in India but does not slow down the traffic. We need to speed up the transportation of goods. Over 30 to 40 per cent of the agricultural production is rotting on the road, which in turn is hurting the economy. So I am not a friend of upgrading the horsepower only. For mining and special transportation it makes sense, for full roads to go from north to the south, it makes sense. Since this is now Daimler trucks Asia, Fuso as people know, is a light duty product company. Many people are not even aware that we have a heavy duty range. The heavy duty trucks we are selling in Japan are top notch. So, what do we have for Africa, for GCC, the Middle East, from South East Asia? We have nothing. This is the truck (the Thunderbolt). There, this truck will not compete in the Indian environment; it will compete in an European environment. It will compete at 360 hp; at 400 hp. The South African ask us, your engines are small; we need 500 hp. We tell them, no, that is not required. As long as I can provide 2,100 Nm of torque, you have to give me an evidence that you really need 2,300 Nm torque. The ratio for exports will be at least 70 per cent.


Q. What markets are you targeting from India?

A. We will be targeting every country except South America. For Africa, we will start directly from Kenya. We are reorganising a lot of things; we are leveraging power. I think we are a super power in innovation. You want to be in every market with a tailored concept, and India is a solution for that. We want to rise to the next level of connectivity, which is important for a lot of markets. For India it will be far more important than many things because the youth is here. The people are growing up off Apps. People are not used to what we are used to; they just over jump. In India we will see a lot of surprise in terms of technology. People will not wait. They copy what we did. They will shift faster to the next generation than we can imagine.


Q. How much have you expanded your dealer network?

A. We have 82 points of sales and close to 75 or 76 are 3S dealers. We are doing something that we call as ‘undone’ system. Here a big watch is running backwards. The production guys know exactly that we need to do this in this much time. In service, we have standardised maintenance things. Certain maintenance things. We have a big watch at the service station so that the mechanics are under pressure. This will allows to keep the things transparent. In finance we are excellent. The team is excellent. They have a market share in financing in more than 40 per cent. The customers are appreciating it. The customer has appreciated our insurance schemes. Our schemes are massively copied by our competitors even without thinking if their trucks are ready for this.


Q. What about the bus sector? Will you offer the entire bus range? Some of your buses are based on Fuso?

A. The buses are based on the medium-duty chassis and powertrain, which means Fuso based products. This includes school bus, staff bus, which will mainly be for India. We will be distributing chassis to the whole world, and this will be done under the Mercedes-Benz brand.


Q. Will it follow the same route of the BharatBenz trucks for the export market and will you sell those buses in Africa?

A. Yes, massively. But, there (in export markets) it will be less complete; it will be more chassis business. Here (in India) it will be less Fuso, and more Mercedes-Benz.


Q. How big is the bus market in India? What about the coach segment?

A. The bus market, which I see is 44,000. But, the bus market, which is 8-9 tonne, is 34,000 units. The latter is a more relevant market for us. It is certainly of interest for me. Few years ago it was close to 40,000 units. It will go up to 60,000 units as India has a huge potential for buses. There was an incident last year regarding a coach bus, which deteriorated the trust in the segment. So if we need to build this product out of India we need to rebuild the trust of the Indian customer. There is a growing demand for comfortable travel in India. Our buses will also be for export market, which may not include Europe, but indeed Taiwan and Saudi Arabia.


Q. What is the most important segment in the bus segment for you?

A. It has to be a school bus. In that segment, the security has a different factor for people to use it.


Q. They say there is a huge potential in the Indian market. What are your thoughts?


A. In the mid-term, yes. But in the long-term, this market has a potential of at least 450,000-500,000 trucks. The density of trucks is extremely low. China has 1.4 billion people, 900,000 trucks, whereas in India it is 200,000 trucks. So, even if we double up, it will still be half of where China is already. So the potential is really enormous.


Empowering Transporters

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Article by: Rajesh Rajgor

Interview by : Rajesh Rajgor

Q & A , Nalin Mehta, MD and CEO, Mahindra Truck and Bus Limited.

Empowering Transporters

Q. Away from building and selling commercial vehicles, what have the seven MPOWER programmes and two Mentor summits delivered?

A. There was an impression that the young generation is not excited about venturing into the transport industry. The amount of hard work and dedication shown by young transporters at the MPOWER Programme, which we conduct with IIM (Ahmedabad), tells a different story. How excited they were was more than visible when we challenged them with the MPOWER War Room. They were told to implement what they learned during the course. Close to 26 case studies were short-listed in the first MPOWER War Room. It did not take long to realise that the young transporters are eager to venture into the transportation industry, They want to however break away from the trodden path; drive in more professionalism. The Mentor programme thus was the outcome of the learnings from the MPOWER youth programme. The veterans felt that their prodigies carried a false impression of having learnt it all. While they understood that one of the gains that will surface from the Mentors’ Summit will be networking but the extent of that networking surprised us. They (veteran and his prodigy) may not be competing in every area, and through these programmes they have learnt how to collaborate. This is something that we think has been delivered.

Q. How has such an endeavour reflected on the sale of your commercial vehicles?

A. We are new in a marketplace that contains brands that have been there for 30-40 years. The whole business is about relationship and trust. It is necessary to understand that every activity should not be linked and converted into sales. If you see these things and then judge whether we have gained or not; the gains are bigger than what you see on the ground. The gain is not just in terms of people, we have touched; we have created a relationship. Many transporters for instance won’t even give us a hearing. They are big in their own ways and have large fleets. The relationship that has been developed assures that we are heard. It also helps towards building mutual trust. This reduces the resistance, and increases their propensity to look at our brand. Our trucks and buses are a little ahead of its time. By creating a mindset for the future, we are creating a place for ourselves. So to measure the success of our programme in terms of sales is not right. When it comes to the market share, we have a very good amount of it. There are only two OEMs who have grown in market share. Last month (June 2015) we recorded a 3.3 per cent market share in HCV and about 9 per cent market share in LCV segment. We sold about 1100 LCVs and HCVs.


Q. How would the announcement to invest Rs. 500 crore relate to performance in terms of sales?

A. One part of the investment will be towards the expansion of our current product range and to enter into Intermediate Commercial Vehicles (ICVs). Second part will go into a new range of LCVs, and in the design of new cabin and a new chassis. Third part will go into the upgrading of the current product range. A BS IV vehicle has to be engineered; new variants of the existing products are to be brought out. There’s also a 49-tonne (tractor-trailer) that will come. We are also doing a 8×4 tipper. We are also doing a rig version for the tube well drilling industry. As you may have found out, we are continuously investing money. It will take us three years to bring the ICV. So I see MTBL (Mahindra Truck and Bus Ltd.) to be a significant player in the next three years.


Q. Are you still using Navistar engines for your trucks?

A. Yes, the engine is from Navistar. As you are aware, we had a joint venture with Navistar. We have a perpetual technology agreement and we pay royalty to them. Any further developments we do in the engine is our own, and they can take it from us at a price. The engine is very fuel efficient. Even more fuel efficient versions will keep coming as fuel efficiency is a never ending game. Right now our engines are as good or even better than the class leading products. Everyone claims that their engines are class leading. We are saying it on the basis of the share we are gaining. It is a proof that we are moving in the right direction. Our cabin is the best in the industry. Our chassis and aggregates are the strongest. Many of our trucks have gone past three lakh kilometres and the robustness is still the same. We have got feedback that even after using for four years the cabin is as intact as it was when new. The common-rail engine we have, we will offer in our 40 and 25-tonne vehicle. The wet liner technology does not mean the complete engine has to be pulled down to overhaul. We have individual heads for every cylinder. Every bit need not be taken apart. Apart from a modern engine, our cabins are also modern. They have been crash tested, and as of today there is no need to add more safety elements to it. The cabins are already 10 years ahead of their time. We have followed norms that are still not mandatory in our country. It can therefore travel to any developed country right now.


Q. Does the engine perform in terms of regulations?
A. The engine is already BS III emission compliant. It will take minor (after treatment) work to upgrade it to BS IV.


Q. How do you look at driver shortage. Are you planning any empowering programme for them?

A. The transport excellence awards that we present include an award for drivers. We gave one driver a truck and made him the owner. We gave one truck to the first women driver, Yogita Raghuwanshi. Each year we award drivers. There references are provided by fleet operators. This is our way of encouraging drivers; by motivating them to become a truck owner. The first driver whom we gave this award has already bought another truck. We are also conducting Mahindra Saarthi Abhiyan where we give scholarships to the daughters of truck drivers who strived to educate their daughters beyond tenth standard. We see it as recognising the efforts of the driver. The girl can opt for any course she may like. We give Rs.10,000 as scholarship. We would have dispersed one-crore rupees last year. Even this year we will conduct the Mahindra Saarthi Abhiyan.


Q. How big is the MTBL dealership network?

A. In the last three years we have set up close to 63 facilities. In addition, we have close to 53 authorised service stations, which also act as expert local workshops. We have trained 1400 local mechanics, which are connected through our call center. They also act as our road side assistance (RSA) points. So if a truck has met with an accident, the operator calls our call center. The call center in turn calls the nearest RSA point. It reaches the location of breakdown and conducts the repairs. Our call center is multi-lingual, and manned by engineers. The prime service center at Pune is where the call center is. The call center thus doubles up as a service center. So, when the driver calls, it is easier to figure out if a ASC (Authorised Service center) or a RSA should be pressed into
the job.

Staying ahead

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Article by: Staying ahead

Q & A : Ravi Pisharody, Executive Director — Commercial Vehicles, Tata Motors

Interview by : Bhushan Mhapralkar

Q. What growth will the CV industry achieve?

A. We are seeing more of what we saw last year. M&HCV sales continue to grow at 20-25 per cent, driven by cargo. Cargo M&HCVs are growing at 30 per cent on replacement demand. Tipper and construction truck part, which accounts for 30 per cent, is flat. Not like 2010-11, which saw the last big purchase. Replacement demand is connected with resale value. Demand is also coming from clients that are asking operators to buy new trucks, which are efficient and have a faster turnaround time. On October 01, 2015, some regions will move to BS IV emission norms. ABS and speed limiter will be implemented from October 01 as well. Some pre-buying to offset three to four per cent price hike is expected. We however want IIP (Industrial GDP) and mining recovery to come in. Also, agriculture. The base effect is kicking in. Buses (4 to 11-tonne) performed better in the first quarter. Small pick-ups have seen no major impact. It is essential to look at each segment. M&HCVs are growing at 20 to 25 per cent and Small Commercial Vehicles (SCVs) are declining. Companies with a complete range hold the chance of looking adverse in the short-term.


Q. What impact would regulations have on growth?

A. Regulations are a part, and also the return of some of the growth drivers like the move up to higher tonnage vehicles, tractor-trailers, etc. Today, tractor trailers are the fastest growing; two-axle trucks are the least growing. Customers want to invest in new segments. The 49-tonne segment for example. Introduced six years ago, this segment almost vanished during recession. It is coming back. Also, the move to higher hp. We led the movement from 150 hp to 180 hp in 2010-11. We are seeing a move up to 230 hp trucks from 200 hp. Even multi-axle designs due to more open competition. All the big names are here. It is obvious that people would like to differentiate. A movement towards higher spec products is on therefore. Regulations like ABS and speed limiters will help.


Q. What about alternate fuel technologies?

A. Government is trying to get some sort of electric play, and we want to be at the fore-front of it. In the area of hybrid buses mainly. The biggest area for electric play is the city hybrid bus. We are piloting a vehicle for almost four years now. We are trying to talk to the government and frame the FAME programme; to make it commercially viable. A BMTC order is part of that programme. We qualified for a hybrid tender BMTC floated. The price of the product is making it a bit of an issue. A strong push is necessary for alternative fuel technology or hybrid. We were expecting a larger outlay by the government in the budget. We expect it to come.


Q. So, buses are seeing a technological leap?

A. We are working towards executing an order for articulated buses for Hubli-Dharwad by December. There was no articulated bus purchase for many years. Higher unit price is difficult to afford. Technology is slowly moving up. For JNNURM recognition, many bus body builders are becoming bigger, professional and more efficient. With Bus body code fully implemented on August 01, 2015, ‘Mickey Mouse’ body builders will find it hard to derive a cost advantage. This is good for companies like Tata Motors and Ashok Leyland. Buses are highly regulated, and have a socialist agenda associated. They need the right permit; need to be allotted a route. Also, seen is if the state transport undertaking will be affected. Issues like these may not make hybrid buses viable. State transport undertakings cannot increase prices, and for a better experience, the need will be to recover costs by charging higher.


Q. What about the luxury bus segment?

A. For upmarket body builders it is like a boutique work. The super luxury high deck coaches are worth Rs.70 to Rs.80 lakh. The body price is five times the price of the chassis. Conversely, in a typical school bus, the price of the body and the price of the chassis are the same. Thus, a bus body is not small, and the reason why we invested in a company. With regulations, the body is becoming more expensive. Unlike China where the bus market is 50 per cent of the truck market, in India it is 15 to 20 per cent of the truck market. It will remain limited.

Q. How will competition impact?

A. As far as competition is concerned, we are of the opinion that everybody has to be in India. There is no excuse for any company to be not there in Brazil, India, Russia, and China. In Brazil and India especially. BharatBenz has laid out everything they promised in the 9-tonne to 49-tonne range. They will get a chance. Especially in those markets that regard foreign as hi-tech. Making a transition from three players to eight players, the market will see some market share correction in the short term. Many may appear in the long term. There would be no permanent repercussions with new entrants like Suzuki launching an SCV. Measured in primary sales, market share will see some inflow. The need however is to look at it 18 to 24 months down the line, and if it is sustaining. For us, the challenge is quite enormous. We are not undermining it. We have to protect from an Ace Zip to a Prima truck, or a DTC bus. Different competitors are focussing on different areas. With 60-70 per cent market share, we will have to anticipate and identify gaps. Some even though we do not find it interesting.


Q. Is government participation absolutely necessary for FAME?

A. Without government support it is not viable to participate. Not unless there’s certain volume. The battery and some of the key items cannot be localised. Dialogue is on, and while it may have been a little late for the JNNURM tender, there is a tender MMRDA has floated for 25 hybrid buses. MMRDA will run a hybrid bus service from Bandra-Kurla Complex. Despite a policy in principal, it is becoming a bit staggering to support 40-50 per cent subsidy. It amounts to Rs.40 or Rs.50 lakhs for a low-floor hybrid bus. If one were to sell 100 buses, so much money is involved. It is here that the authorities are struggling to try and give a mass face to the programme. Buses are going to benefit mass users but the number of vehicles they can showcase is only this much.


Q. How do you look at competitors who lashed on to certain segments?

A. A competitor exploited tipper segments in 2008, 2009, 2010 and 2011. Today, the numbers that we see are very low. MAN, Navistar did not get the sort of trial a BharatBenz or a Volvo got. From their numbers, available in the public domain, it is clear that they are not getting the benefit of the 20-30 per cent upturn. The need is to look at staying power; those who have back-end technology. If you don’t have back-end technology, you have tie-ups taking place. There are some who have preferred to go on their own. We will have to wait and see. Some are seen crossing 500 units a month, which is less than two or three per cent market share. It is therefore easy to understand why BharatBenz came to be the third largest player very quickly in the M&HCV segment. The only other player is Eicher. It is in the 9- to 16-tonne range. The moment BharatBenz went up to 800-900 units, they announced that they have become the third largest player.


Q. What do you hope to achieve by expanding the dealer network?

A. Before Ace came, there was no touch and feel factor associated. We expanded from 300-400 touch points to 1000 touch points with the Ace and Magic. Existing dealers invested; new dealers were appointed; at locations (inside cities and towns) were the Ace could ply but not a big truck. The current wave began two years ago with the need to compete with new players. Ensure showroom experience. New technology like BS III and BS IV calls for a laptop to repair vehicles. A strong transformation to fully built vehicles is on. In buses it has reached 70 to 80 per cent. One may not want to experiment with more expensive products like the Ultra and Prima. Some of the sales outlets (1S) have expanded to include three to four service bays for SCVs. Coming to include programmes like 24×7 assistance, apart from expanding current locations and establishing new locations we are focussing on proper connectivity of service centres. We expect our network to reach 4000 touch points by the end of FY17 from the existing 3000 touch points.


Q. With many dealers stressed, how do you look at their ability to modernise?

A. Over 60 to 70 per cent of the revenues come from trucks, and the recovery is helping. CV numbers may not be picking up yet, the revenues are higher than that of the previous year. This is good for vendors, and for the channel partners. Return on investment is measured in revenues rather than the number of vehicles sold. Sale of eight to 10 Ace Zips can be made up by the sale of one big truck. Similarly, sale of five to six Ace or Magic can be made up by the sale of one truck. This will also explain why the M&HCV recovery is so critical. Keen to maintain the dealership structure or culture, we would not like a dealership to fail. In case of a CV dealership, due diligence can be exasperating. It can take one-and-a-half year to issue a letter of intent. It will take another one year for the dealership structure to be established. If is therefore, that we are talking about a lead time of up to FY17.


Q. How popular are fully-built trucks?

A. Multi-axle tipper sales account for 100 per cent fully-built units. Tractor-trailers already come with a cabin. The issue is with multi-axle trucks. Insistence on cowls is there. In the 16-tonne to 25-tonne multi-axle truck category, the market remains value conscious. Customers in this category prefer a wooden cabin as costs are low. In case of an accident, the cost of a wooden cabin is not as high as a fully-built vehicle cabin. We have embarked on an education programme, but the per centage of fully-built vehicles in the the category is still at less than 10 per cent.


Q. What about exports?

A. We have been exporting for 20 years. It is however not enough to balance against a domestic down cycle. Availability of Prima, Ultra, and SuperAce with a 1.4-litre common-rail diesel engine will help us to reduce our dependence on SAARC markets like Bangladesh, Nepal and Sri Lanka. These markets don’t have a local brand. There are export markets that we are in, which include European brands. Our products compare well on appearance and specs, and offer a 10 per cent price advantage. We are getting repeat orders from the Middle East, South Africa and other markets. Planning to go up from 45,000 units last year to 1,50,000 units in a three-to-four year time frame, our first quarter results show that we have grown by 35 per cent on export numbers. We have launched pick-ups in a number of Asian markets like Philippines, Indonesia, Malaysia, Vietnam and Australia. We are already present in Africa. In Thailand we are diversifying our range beyond Xenon, to trucks. We will soon begin export of SuperAce Mint. We will also launch a refreshed Xenon with extended space cab. Half the Thailand market is about space cab pick-ups. In Tunisia we started an assembly operation. We also have a manufacturing JV in South Africa. We entered the Saudi Arabia market in 2013. In the manner in which Suzuki had to develop a diesel engine for India, we had to develop a petrol engine for the export (left hand drive) variant of the Ace.


Q. What about regulations and technology when it comes to exports?

A. Unless we have a critical mass in a Euro 6 product, we may not look at Europe. It is an extremely expensive proposition. A declining market with solid home grown players can be an expensive affair. The products that we are going with are not leaps and bounds ahead in terms of technology. Though more developed than us, many markets are yet to reach the BS IV levels. In many markets we have had to go back to BS II specs to export some of our products. We will therefore go with our products where there is a scale for our technology. We are investing in Australia. It is one of our lead markets from the technology stand point. We are looking at automatic transmission on a pick-up with Australia as a lead. We are also working on Euro 5 and Euro 6 because it will come to India in 2019 and 2022. Our presence in some of the export markets is giving us a head-start to go into some of the technologies rather than wait and scramble at the last minute. It is an enormous task across cars and commercial vehicles.


Q. What are your capex plans?

A. We have been anticipating competition, exports, and in a sense that the capex, which is somewhere between 1500 and 2000 numbers, will continue. There is hardly any product in which we are investing only for exports. We are planning an AMT in an ICV category vehicle. The two big cabin-platform investments – Prima and Ultra – are behind us. Not expecting dramatic rise in sales, platform renovation will continue. We invested in capacity in the past. When the M&HCV capacity was running short at Lucknow. As a result we got good growth in 2010-11 and 2011-12. If we had not expanded at Lucknow, or if Tata Cummins would not have setup a facility at Phaltan, we would have fallen short. We have also invested at Dharwad for SCVs. We are facing issues of under utilisation for past three-four years, but the capex is focussed on product design and development; very little on facilities for the next five to six years.


Q. Is the market discount oriented yet?

A. The market is still heavily discount oriented. We have capped our discounts. We don’t want to be a discount leader despite having in excess of 70 per cent market share. We feel it is a better long-term measure at the cost of some short-term loss till the market gets better. We are seeing a strong recovery in South. The fall in that market was also the largest. This is over a four year cycle. We are not missing any particular segment, product-to-product. The Prima 4018 and 3118 continue to lead their respective segments.


Q. You have bagged defence orders?

A. Defence is a business waiting to happen. Even before this government came in, over the last three-four years, there has been sufficient talk about buying from the Indian private sector. Before the ‘Made in India’ thing came about. We have been asked to put our vehicle on trial. It is a big ticket – in the 6×6 and 8×8 segment. These vehicles have not been bought from India. Replacement demand for such defence vehicles is thus coming up. While we want to export more defence vehicles, ‘Make in India’ is really applicable in defence vehicles. The 6×6 quotation was received in 2011-12. As trials go on for longer periods, we have received an order now.

Frugal Tech

Q & A

Vinod Aggarwal, Chief Executive Officer, VE Commercial Vehicles Ltd.

Interview by : Anirudh Raheja

Q. M&HCV sales have been growing. LCVs continues to drag. What do you foresee?

A. It is true that the overall heavy-duty segment (16-tonne and above) is doing well. If you drill down further to haulage, and construction and mining trucks, the haulage segment has gone back to almost 90 per cent of its earlier peak in 2011. It is expected to be close to 150,000 to 160,000 units in 2015 as against 175,000 units in 2011. This has primarily been led by replacement demand, and may touch the peak in 2016. Construction and mining trucks are still in recession. They accounted for 60,000 to 65,000 units in the 2001 peak times, and are likely to be down to around 35,000 to 40,000 numbers on an annual basis in 2015. Even though, there is good growth in high end coal mining tippers, demand for iron ore mines as well as construction tippers continue to be in the recession mode due to stagnation in infrastructure investments.

In light and medium duty trucks (5 to 15-tonne), the recession continues; even though the decline has stopped. If you look at 2011, this segment peaked at around 100,000 units per annum. It dropped to 65,000 units in 2014. The last year average of 5,000 units per month is still continuing in the current year, and has not witnessed further downfall. In August 2015, there was a growth of around 20 per cent in light and medium-duty trucks. Going forward we have to see when it will start to recover; will hit peak volumes once again. One of the reasons for recession in this segment is sentiments in the rural areas. They are not yet upbeat due to monsoon worries. The other reason is the funding problems small operators (who use light- and medium-duty trucks) are still facing. There is always a lag in the recovery between heavy-duty and light- and medium-duty trucks. The lag has been longer this time as against the normal lag of six to nine months.


Q. Has the dilution of stake by Volvo brought any change in the JV?

A. As far as the JV is concerned, there is no change whatsoever. The shareholding pattern as well as the corporate governance structure continues to be same as before. The dilution has happened in the Volvo Group’s holding in Eicher Motors, which was a financial investment. Volvo Group continues to hold 45.6 per cent share in the joint venture. The commitment of both the shareholders to the JV continues to be extremely strong and their actions speak for themselves. Volvo Group has set up an Euro VI medium-duty engine truck plant, VEPT, at Pithampur, to meet medium-duty engine requirements. They have also extended technologies that are required for the development of the Pro series of products. Both the partners have extended tremendous support that is required to meet the vision of driving modernisation in the commercial transportation in India as well the developing world.


Q. A significant milestone, the modern engine plant at Pithampur, what could come next?

A. We have industrialised Volvo’s 5-litre and 8-litre medium-duty engines in India by setting up a state of the art plant at Pithampur. The base engines are Euro VI emission compliant, and have been adapted to meet Euro III and Euro IV emission norms. They are also powering the Pro 6000 and Pro 8000 series in BS III and BS IV emission guise. At the VEPT plant, we are currently manufacturing 1,500-2,000 engines per month. The number will rise as sales of Eicher heavy-duty trucks rise, and as demand from Volvo Group grows. The installed capacity of the new plant is currently 50,000 engines per annum. It can be hiked to 100,000 units per annum.


Q. What about the market growth of VECV buses? Do you foresee a distinct shift with the implementation of bus code?

A. Last year our market share in the bus market was 15 per cent. In 2008, it was close to 6 per cent. We are steadily growing in the bus market, year-on-year. We are having a strong position in school and staff bus segments, and we are planning to become a strong player in other segments like route permit or inter-city coaches. Also, in State Transport Undertaking (STU) bus segments. As far as the new regulations under Bus Code are concerned, all the buses that are manufactured by us or by our body builders comply with it. One of the big challenges will be enforcement of these regulations in India that all regulatory agencies need to ensure.


Q. What is the current status of JNNURM II? What about AMRUT?

A. The execution of the schemes has been very slow. Tenders have been issued and bids have been accepted, yet STUs are finding it hard to get the right contractors to run these latest technology buses. There are also funding constraints with STUs due to which implementation of the schemes has been slow.  


Q. Are all the Pro series models out? How are they helping VE to carve out a place at the heavy-duty end?

A. We will continue to add more and more models as we go along. We have released nearly 90 per cent of the models in the light and medium duty CVs that operate under Pro 1000 and Pro 3000 series. In the heavy-duty segment, the launches have been slow.We have launched a few models under  Pro 6000 and Pro 8000 series. We are also in the process of releasing more models for heavy-duty segment in 2016. These new technology trucks offer significant advantages in fuel efficiency as well as turnaround time and will lead to higher life time profitability for the transporters. We consider it to be the future of Indian trucking industry. We are now making all the trucks ready for  BS IV emission norms that are becoming applicable in some parts of the country from October, 01, 2015, and in whole country from April, 01, 2017.


Q. There are talks of skipping BS V emission norms and moving to BS VI?

A. Both technically and commercially, it is not advisable to skip BS V. There are major changes required in engines as well as fuel like sulphur content in the emissions, major reduction is required in NOx and particulates. Apart from these, a very advanced electronics and controls are required that need not only huge investments but also the long lead time. Fuel companies also need to make major investments for reducing sulphur content in fuel. If the industry has to move to Euro VI from Euro IV in a short time, that will need huge investments and incremental cost of engine will also increase substantially. Therefore it is advisable to do the same in a proper sequence. Moving upto Euro V, and then to Euro VI.


Q. How far has the development on RESLF bus progressed?

A. Since the option is available to continue using the front engine buses, the concept of rear engine buses has not taken off well in the mass market products. Thus at the moment we are not pursuing RESLF buses.


Q. GST has been stalled? There is a talk of a new transport ministry with a dedicated secretary. How do you look at these developments?

A. The industry is looking forward to GST implementation for quite some time now as this will not rationalise the cascading taxes but also bring in efficiencies in distribution. Even though the government is very positive and committed, they are not able to move fast because of various reasons. Earlier we were thinking that GST will happen from April 01, 2016, but looks difficult now.

Setting up a new transport ministry with a dedicated secretary level person will bring in more focus on this important area and this it is a step in the right direction.


Q. What is your opinion on the FAME program?

A. It is an ambitious project, but electric mobility in India is still a few years away. With electric mobility, the costs will go up significantly. It will still take some time before it takes off in India.


Q. Eicher is known for frugal engineering, and Volvo is known for technology. What does it signify to the competition in terms of growth and new products?

A. We have adopted Volvo Group world-class technology using our frugal methods. We have been able to develop our entire new line of Pro series products from 5-tonne to 49-tonne at the right costs. We have optimised the investments and achieved much more with less investments. We now have an entire line of new products with latest technology adopted from the Volvo Group; a state of the art engine plant that produces Euro VI compliant engines for the need of the Volvo Group. We have a new state of the art bus body building plant; two new gear manufacturing plants, and a totally revamped and modernised truck plant with CED paint shop, and new assembly lines and a
body-in-white shop. We have a state of the art parts distribution centre and five company owned and operated dealerships. All these have been done at a cost of Rs. 2200 crore. We have achieved much more with less.


Q. Give us an update on Eicher Sure program?

A. Through this program we are trying to create an organised market place for used trucks. Since a truck comes back into the market in five years, remarketing it assumes a lot of importance. Keeping that in mind, we have taken this initiative to facilitate better realisation of the value of used trucks by getting the trucks refurbished. Eicher Sure team also helps in finding the right buyer. Earlier, the brokers used to pick up these trucks at throw away price and sell it at an exorbitant price, thus making a lot of money in the process. Eicher Sure team tries to connect the genuine buyers with sellers and that results in better value for used trucks.


Technology plays an important role by ensuring productivity, higher uptime and efficiency. It is contributing to lower TCO.

Article by: Jeffry Jacob and Dr. Wilfried Aulbur

Story by : Jeffry Jacob and Dr. Wilfried Aulbur

Technology plays an important role by ensuring productivity, higher uptime and efficiency. It is contributing to lower TCO.

The Commercial Vehicle (CV) industry is heavily influenced by the development of the transportation industry, including changing logistics business models, the world over. The industry is always adapting to increasing competition, new mobility concepts, and transparent fleet management; forcing existing OEMs to modify their business models to compete more effectively. Technology plays an important role in such an environment, helping to clock higher uptime, up productivity and efficiency while leading to lower Total Cost of Operation (TCO). As per the Roland Berger 2025 study we believe four mega trends – Efficient, Green, Connected and Safe – will shape the CV industry and define the road map for the next few years. Technology plays a critical and integral role in translating ‘Efficient’ into lower TCO, better fuel economy, vehicle platooning, higher uptime, optimum fleet management, etc. ‘Green’ subsequently translates into meeting stricter emission standards, increasing after-treatment applications, improved aerodynamics, alternative fuels, noise reduction, light weighting, etc. ‘Connected’ translates into remote diagnostics, performance analysis, telematics, etc. ‘Safe’ translates into accident free transportation, driver assistance systems, pedestrian safety, intelligent traffic warning, autonomous driving, inter-vehicle communication, etc.


Stringent regulations

Regulators globally are becoming stringent. They are coming to play an important role in promoting the use of technology, mainly through legislative mandates such as fuel standards, emission and safety norms. At the same time, fleet operators and logistics companies are keen to leverage technology as future drivers of profitability. OEMs, at the other end, are viewing new technology areas as a potential to boost their profit pools. Several technological features such as emergency braking assistant, intelligent cruise control, brake assist and hill-holder for distance control; backup camera for parking; electronic stability control and lane monitor for directional stability are being adopted in varying degrees by CV customers globally. We can, in the medium term, expect to see further development and adoption of technologies such as blind spot warning, blind spot monitor, night-view assistant, active lane assistant and parctronic. More advanced features such as lane-change assistant, stop and go assistant, active lane-keeping assistant, manoeuvring assistant and backup assistant are expected to be available in the long term.

The EU has mandated, that from 2015, all new trucks must be equipped with lane departure warning system, and from 2018, they should be equipped with advanced emergency braking systems. The focus beyond Euro VI emission norms will be on greater fuel efficiency as a major lever to reduce TCO. This is of particular importance not only in reducing the cost of operations and helping to keep the environment cleaner, but also to help reduce sovereign dependence on imported crude for most developed and emerging economies.


Eyeing future requirements

Several global OEMs have already started incorporating advanced technologies. Many have developed concept vehicles keeping in view the future customer requirements such as efficiency, reduced environmental impact, driver comfort and safety, and improved perception of transport. For example, tyres with low emission noise and better engine casings. MAN Concept S (drag co-efficient of 0.3) with modified semi-trailer achieves 25 per cent fuel consumption reduction in comparison to conventionally equipped 40-tonne long-haul trucks. Leading manufacturers such as Daimler, MAN, Volvo and Iveco are continuously focusing on next generation technologies. Daimler, for example, is actively pursuing development of the third generation Active Braking Assist (ABA3). ABA3 will be able to bring a truck or a coach to standstill if necessary when faced with stationary obstacles, thereby avoiding over half of all rear-end collisions involving heavy commercial vehicles. Further developments in ‘Lane Assist’ systems are being worked upon. These, in addition to giving visible and audible warnings when a truck is about to leave its lane, will also actively keep the truck in its lane and steer the truck in case of a dangerous situation.

Technological innovations from passenger vehicles are finding their way into commercial vehicles. Entering into series production on the Mercedes-Benz S-Class in 1995, Electronic Stability Program (ESP), within a few years found its way into commercial vehicles albeit in a more complex form, and configured to suit a wide range of variants with different wheelbases, axle configurations, bodies and load conditions. ESP has now been successfully applied for 20 years; has firmly established itself as a standard equipment. Another example is the emergency braking assist, which is found on cars, vans, trucks, buses and coaches alike.


Technology in the Indian context

CV is an important part of the Indian economic growth engine, and an indicator of the GDP growth. Currently subdued, green shoots are already visible. Their growth trajectory will resume sooner than later. In such a scenario, technological advancements will be a key to the future growth of CVs in India as well. An average truck sold in India costs far less for an equivalent specification as compared to a truck sold in Europe. It carries the same weight, and in some cases, more. Its exposure to tough terrain conditions means it has to be durable too. This is possible only through innovation. Innovation in product or process design would ensure that its function is satisfactorily fulfilled. In addition to the technological influences of the West, Indian manufacturers would need to leverage technology effectively to reduce overall cost of ownership and meet stringent price points demanded by the operators, at the same time satisfying all functional and regulatory aspects.

In the case of regulatory aspects, the main focus will be emissions and safety. ABS has been made mandatory by the Government of India for commercial vehicles. This is expected to lower India’s high road accident and casualty rate. It is amongst the highest globally. Commercial vehicles are also expected to be fitted with speed limiters to prevent drivers from speeding beyond 80 kmph. The government has announced its firm intent to encourage sales of electric and hybrid vehicles in India under FAME (Faster Adoption of Manufacturing of Electric and Hybrid vehicles in India) through incentives for both battery operated and hybrid models. Incentives range between Rs. 17,000 to Rs. 1.87 lakh for LCVs, and Rs. 34 lakh to Rs. 64 lakh for buses. In a country like India where sourcing qualified drivers is a Herculean task, technology will ensure better driving comfort, less driving stress and a safe experience. Systems such as Advanced Driver Assistance System (ADAS) will further reduce overall cost for fleet operators by ensuring accident-free transportation and minimising downtime due to driver error.



Technologies like advanced fleet management systems, adaptive cruise control, telematics, etc., will get more pervasive in India. They are currently available and used widely in other parts of the world, and have already proven themselves in the area of fuel savings and to reduce the cost of operations. Truck connectivity implies a multitude of solutions and potential profit pools for Indian OEMs, setting the ground for enhanced services and new business models. Some of the key areas of connectivity include vehicle management (remote diagnostics, maintenance planning, remote function download, breakdown call, vehicle protection), load monitoring (temperature management, load detection), driver management (driver entertainment, emergency call, performance analysis), operations/logistics management (order management, trip records, smart navigation) and time/legal management (time recording, tacho management).

According to a recent Roland Berger study in India, M&HCV fleet owners are increasingly accepting telematics solutions, while looking at them through the lens of productivity, efficiency and cost savings. Telematics has so far had a low adoption rate in India. Reasons include price sensitivity, infrastructure deficiencies (data network, connectivity of local authorities and business partners) and fleet ownership patterns (huge proportion of small fleets with low degree of professionalism). The development towards larger and more professionalised fleets, logistics providers have started favouring telematics services. Customers are also increasingly demanding telematics from their logistics providers. As a result OEMs are also focusing on investing significantly in such areas.


Technology a key to road safety

Technology is the key to increasing road safety in India which has one of the highest road fatalities globally. Currently there is no widespread application of driver assistance programmes in India that will make driving safe for both, the driver as well as other vehicles on the road. Technology will play a key role in the development of CV market in India and will be driven through lasting tangible benefits to OEMs, suppliers as well as fleet operators in terms of lower cost of operations and better safety. The enforcement of ABS and revised Bus Code will enhance safety while also leading to challenges such as price increase. Features related to safety, telematics, etc., are expected to be driven more due to competitive pressures than due to regulatory norms. OEMs have a key role to play in the adoption of technology by customers through tailored solutions. They have the task of providing customers with a convincing TCO business case and adopting a syndicated approach to address current infrastructural deficiencies in the market.

Current day trucks are miles ahead of what was available a couple of decades ago. They are beginning to rival passenger cars in terms of innovation. While changes in technology upgradation are critical in countries like India, they have to be driven in a clearly defined manner. It may be driven by legislation in areas such as emissions and safety, or through customer pull in terms of higher reliability and value-added features. Technology can be applied across the entire value chain. It can impact all the stakeholders, including aftermarket participants through better maintenance, fault diagnosis and easier diagnosis in case of vehicle repairs. By the next decade trucks will be a lot cleaner, efficient, connected and safer. Europe will most likely lead this wave, but emerging countries like India, with one of the largest truck parcs, will not be left behind. It cannot afford to stay back..



Jeffry Jacob is Principal at Roland Berger Strategy Consultants (India), and Dr. Wilfried Aulbur is Managing Partner & CEO (India), and Chairman – Middle East & Africa and Head Automotive Asia at Roland Berger Strategy Consultants.

Winds of change

Article by: Sankaralakshmi Sundaram

Story by : Sankaralakshmi Sundaram 


A dynamic shift in Commercial Vehicles (CV) is under way the world over; especially in the medium and heavy-duty segments.

Global trade is expected to grow at 4 per cent in 2015. Spend on logistics is reaching USD 10 trillion, and enough to anticipate that it reaches 12 per cent of the Global Gross Domestic Product (GDP). This comes amidst a scenario where logistics spending in several Asian and developing nations such as Mexico and Egypt is expected to decline on the back of improving freight efficiencies. This will be on the basis of investments in fleet infrastructure, and a reduction in transportation costs by half on account of the declining oil prices over a period of next five years. Value-added services such as telematics and anti-lock braking systems (ABS), and trade facilitation are likely to experience a marginal increase, leading to new vehicle procurement. This is expected to drive the demand for new vehicles. Medium Commercial Vehicles (MCV) growth in India is expected to be higher at 9.8 per cent (YoY). In the case of Heavy Commercial Vehicles (HCV), it is expected to be higher as well, at 12.5 per cent (YoY). The overall CV growth is expected to be 11.3 per cent (YoY) in 2015 against a global average of 3.5 per cent. The only other markets that are expected to post higher growth rates are the Next 11 (Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, Vietnam and Bangladesh) at 8.7 per cent, and RoW (Eastern Europe except Turkey and Russia, Asia-Pacific, the Middle East and Africa) at 7.1 per cent. The winds of change in the form of changing customer buying preferences is not just likely to affect the operating dynamics, including total operational cost and lower downtime, it will, as a consequence, usher an evolution of business models and OEM product offerings in the global CV space.

Premium versus value

The global mass market (up to 220 hp) is forecast to decline by 2022 in percentage terms in the MDT (classified as good carriers with up to 16-tonne goods carrying capacity) and HDT (those that are capable of carrying more than 16-tonne) segments. In terms of unit sales however, it is forecast to grow by 18 per cent. The value segment (220-280 hp) is expected to more than double in the next eight years, largely driven by demand from China and India. Premium segment (over 280 hp) is expected to remain largely the same. Strict emission norms and evolving consumer requirements, coupled with the modernising of road and transport infrastructure, are rapidly altering China’s Commercial Vehicle (CV) dynamics. The market, dominated by Chinese OEMs (with over 90 per cent share), is expected to decisively move toward consolidation in the next six to eight years after decades of rapid growth. As a result, the entry-level mass market truck space is expected to remain flat. The growth impetus will lean more towards value trucks and premium trucks. India, in comparison, is expected to record double-digit growth rates of around 12 per cent across all segments. Combined MDT and HDT sales will reach more than 200,000 units in 2015. Low diesel prices and interest rate revisions, coupled with improving credit availability, will encourage fleets to invest in new equipment. Freight demand recovery, aided by the growth of the industrial sector, has driven demand from the start of 2015.

The Brazilian market will remain under severe stress as truck sales are expected to contract due to poor business conditions which is a result of low growth and high inflation. The economic scenario in Russia is likely to remain restrained as a weak ruble will curtail public infrastructure spending. Additionally, lower global oil prices have also affected the Russian economy. The combined truck market will shrink by 10 per cent in 2015. In US, market growth will continue into 2016 as freight demand expansion is expected to drive new truck sales in the region. The weakness in the economy since 2012 is expected to erode the market for commercial trucks in the Euro Zone.

Austerity measures, coupled with uncertainty surrounding member state defaults, have complicated the business environment in the Euro region leading to stringent vehicle financing options.


Affordable CVs

By 2022, 35 to 40 per cent of all the MDTs and HDTs sold globally are expected to be affordable. Market shares of western OEMs are expected to be increasingly challenged by low cost OEMs from China and India like FAW, Tata and Ashok Leyland in South America and Africa. The continuing economic uncertainty in North America and Western Europe is likely to push regional fleets to offer an entry to low-cost OEMs such as Hyundai. Entry-level trucks from most global OEMs will be priced at about USD 60,000-80,000 by 2022, creating opportunities for common global low cost truck platforms. Rising labour and material costs in emerging markets such as China and India have made the manufacture of low-cost products challenging. The value segment has grown in recent years in these markets, and mainly due to the need for engines with a higher power-to-weight ratio and the proliferation of more technology and safety features in trucks. Low fuel prices reduce running costs and make value segment trucks affordable, eventually leading to low Total Cost of Ownership (TCO). Value trucks possess better safety features such as ABS and airbags and more comfortable cabs (with air conditioning and adjustable seats, etc., available at a premium). OEMs from India and China have formed strategic alliances and joint ventures with North American and European OEMs to improve their product offerings in terms of technology, reliability, safety, and comfort. This puts excruciating pressure on the OEMs to invest in R&D activities for cost optimisation. Various avenues of implementing cost reduction ideas effectively are being explored. Premium truck manufacturers are reluctant to introduce low-cost trucks into the market for fear of brand dilution. Customer perceptions can change quickly due to doubts regarding truck quality, reliability, and durability, which could hamper sales and eventually the manufacturer’s margins.


Gearing up for the future

The global trucking industry is moving towards increased emphasis on alternate fuels, enhanced safety standards, substantial weight reduction in highway trucks and tractor-trailers, and automated platooning to improve mileage. While a majority of the consumers, especially in the emerging economies, will continue to choose economy over innovation, global OEMs are all set to increase spending. European players are headed towards de-contenting. They want to enter into the mass market segment whereas the entry level players with strong local competencies are expanding their product range into the value and premium segments to foray into the global HDT and MDT market. Increased penetration of telematics and deployment of big data analytics across the value chain will aid OEMs in identifying alternate revenue streams from existing business models. It will also help them to stay attuned to customer expectations.



Sankaralakshmi Sundaram is a senior research analyst at Automotive & Transportation Practice, Frost & Sullivan.