The Keynote address of Kavan Mukhtyar, Partner and Leader – Automotive (Advisory), PricewaterhouseCoopers Pvt. Ltd., as part of the Apollo CV Awards 2020 highlighted the industry’s need to be agile and responsive.

Stating that this GPD year has brought the slowest growth, Kavan Muktyar, in his keynote address pointed at the challenges faced by the CV industry. As part of the Apollo CV Awards 2020 ceremony, the Keynote address saw Karan stress on a weak consumer sentiment. He touched upon factors like demonetisation and structural changes, and stated that fixed capital formation has stagnated. Mentioning that the fall in domestic as well as international investments in the country is a matter of worry, Mukhtyar opined that the government is investing by driving key projects like the development of road infrastructure. He drew attention towards industrial production by stating that it is stagnant. Touching upon the sharp decline in motor vehicle sales, Kavan said that the CV industry has had a big impact on the slowdown due to its proximity to the economy.

Commenting on the government’s solid measure to build infrastructure, Kavan averred that the agricultural sector has been showing positive results. The benefits of the government’s measures will, however, show up in the longer-term, he added. Stating that the CV industry has been facing challenges for quite some time now, Kavan drew attention to the axle norms and the liquidity crunch. Pointing at the news about scrappage policy, he averred, “There will be some demand trigger in FY2021 in the form of the scrappage policy hopefully.” Stating that the efficiency of truck movement has improved because of GST, Kavan said, truckers are able to get a higher throughput because of enough capacity. This, he added, has led the GST to have a negative impact on the CV industry at least for the short term. This will be the case, he explained, until the industry catches up on capacity. Of the opinion that liquidity crunch and credit scores have had an impact in FY2020, he stated that customer segments are getting used to such developments. Announcing that the economy is slowly moving away from the negative impact of NBFC crisis, Kavan said the economic situation assumes another dimension even as the liquidity situation is improving.

Stating that the environmental impact of the auto industry is putting it under tremendous pressure the world over, Kavan expressed that this has resulted in a dynamic shift in the regulatory environment. Of the opinion that a lot of challenges will emerge out of this in the next six months, he pointed at the move to BSVI. Stating that the manufacturers will be launching (BSVI) products at various price points, Mukhtyar explained that discounting pressure will be high in view of the low demand situation. This challenge, he added, will be particularly felt across the first six months of the next financial year. Touching upon FAME II posing a different kind of challenge, Kavan explained that CV manufacturers are required to build a strategy to deal with such an ecosystem. This would involve tie-ups with financiers, operators and various other elements like the charging infrastructure, he added. He further mentioned that the auto industry until now has not excelled much in this area as much, but would need to henceforth. Expressing that the auto industry has until now taken pride in the fact that they make great vehicles and offer them to the consumers, Kavan said that the axle norms will have an impact on the product mix and how it would shape up the market going forward. Stating that there is a need to manage the commitments regarding CAFE norms, Mukhtyar said that the CV industry will have to be agile and responsive.

Of the opinion that the new regulations will have different manufacturers dealing with them differently, Kavan averred that the effect of this will be on how one manufacturer plays in the market over others. The green space will witness a lot of action, he said. Especially in the area of electric bus and parts localisation initiatives, he added. Touching upon the hike in import duties in the budget, he said that there is a clear signal about localising electric vehicle programmes. Stating that the alternative fuel space will continue to generate interest, Kavan drew attention to the ramp-up plan the government has in case of the CNG filling station. The CNG segment, he commented, will grow at an attractive speed. Stating that the changes in product mix and sales strategy will hinge on the development in infrastructure, Mukhtyar touched upon the coming up of the Golden Quadrilateral and many new freight corridors. Of the opinion that the implementation of GST has led to the optimisation of warehouses, Kavan said that investments in rail will lead to the emergence of hub and spoke transportation model. This will induce a squeeze and at the middle, he added. This squeeze, he averred, will lead to good growth of multi-axle vehicles and light commercial vehicles.

Emphasising on the growth of multi-axle rigid trucks and longer span trucks, Kavan said that sub-segment level shifts will continue to happen. He underlined some of the prominent shifts in progress in the area of multi axle vehicles; in integrated CVs, and in LCVs. Linking such developments to the challenges the industry faces, Mukhtyar explained that there will be a huge proliferation of new models, several variants and many more applications. Stating that such developments would mean CV makers doing less volume per SKU, he averred that manufacturing complexities and supply chain complexities are only going to increase. Drawing attention to areas where investments are flowing, Kavan said that unique application areas will continue to emerge in the wake of initiatives like Swach Bharat. The need to provide more value to the customers will put a lot more emphasis on areas like connectivity or connected vehicles, he added. Stating that the OEMs will invest in vehicle management suite, Mukhtyar expressed that monetising such investments will be a challenge. It will enable a manufacturer to differentiate its product; the challenge, however, would be to monetise them, he said. The challenge, mentioned Kavan, would be to utilise data to turn it into service. From a customer perspective, averred Mukhtyar, the pain points from a goods transportation standpoint, include optimisation of TCO, clocking the most uptime, and in making profits. Changes here are leading to a change in how CVs are owned and operated, he added.

Stating that the segment to lease CVs will experience considerable growth, Kavan explained that the market share of new freight sharing platforms will grow. Anticipating the growth of some of the transporters into forming buyer groups, he expressed that this will lead to them having much better leverage versus the OEMs. Of the opinion that the story is fast shifting from TCO to Return On Investment (ROI), Kavan said that the future will put the spotlight on connected technologies, safety, environment, etc. Customer segment fragmentation will decrease and will lead to the formation of bigger enterprises that are backed by private equity in the truck and bus space, he added. Emphasising a rising shift to e-buses in the passenger mobility space, Mukhtyar mentioned that the key differentiator henceforth will be on how dealers handle bus operators. Summing up his keynote address with three considerations for success — optimising TCO in terms of how much payload could be carried per km as well as the cost of operation, highest level of customer service and parts availability in the wake of service level agreements, high uptime, etc., and developments in the area of connected and intelligent services to add more value to the customer proposition, Mukhtyar concluded that growth would return to the industry sooner than later.