CV industry future

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A panel discussion on the CV industry future at the beginning of Apollo CV Awards 2018 saw the leaders of the industry express their thoughts.

Story by:

Bhushan Mhapralkar

An expression by Girish Wagh, Head – Commercial Vehicles, Tata Motors Ltd., about the effects of GST and the behavioural changes seen at the fleet operator level set the tone for the panel discussion. “Post the second quarter of FY2017-18, fundamental reasons” mentioned Girish, “led to the demand for CVs going up.” Leave for some early apprehensions of how the industry will pan out, transporters reacted positively. Business has been good post the stocking and de-stocking hiccup averred Wagh. Stating that there were some headwinds after GST implementation, Shyam Maller, Executive Vice President – Sales, Marketing & Aftermarket (Light & Medium Duty Trucks, Buses), VE Commercial Vehicles, remarked that fleet owners, parts distributors and retailers felt the pain. “Vehicle dealers who were caught off guard in terms of additional working capital also felt the pain,” he mentioned. Triggering a massive change at the logistics and C&F level, GST is transforming the way goods are carried, announced Maller. Opining that rapid growth in infrastructure is also helping the industry transform, Maller said, “Thirty-seven-tonne trucks have been the star performers this year. Growth is set to unveil itself in the construction truck space. The happy days of 2011 and 2012 are back.”

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Pointing at the start of uncertainties in 2008, Erich Nesselhauf, MD & CEO, Daimler India Commercial Vehicles, attributed the return of strong demand to the backlog. Stating that buyers became nervous after the roll-out of BSIV roll-out, Erich mentioned that it took some time for them to understand BSIV technology. “Acceptance improved rapidly thereafter,” he remarked. Expressing that an earlier communication from the government about GST or its rates would have helped, Nesselhauf said that the fear was of a decline in truck utilisation. The magnitude of demand due to the backlog was however of such magnitude that it pushed truck utilisation to 200,000 km per year from the earlier level of 80,000 km per year. Claiming that international fleets are entering India, Nesselhauf averred, “The demand may be much bigger than utilisation. We have received huge orders from international fleets that are entering India. They are highly professional in nature.” Expressing that those in the business are investing as per government policies, Vinod Sahay, CEO, Mahindra Trucks and Buses, expressed that a good per centage of CVs in the future will be made up of alternate fuels and electricity. “At least for a couple of more years, a large part of heavy CVs will comprise of diesel. BSVI is a good and clean technology,” said Sahay.

Electric and other technologies

Of the opinion that buses will go towards electrification, and would be legislation and customer driven, Sahay averred that there will be a mix when one considers small CVs, inter and intra-city CVs. Stressing on electric vehicle transition accompanied by technology acceptance, ecosystem adoption and successful commercial adoption of technology, Sahay remarked, “Diesel will be a fuel of choice in the foreseeable future for inter-city and highway trucks.” Suresh Chettiyar, Business Head, Volvo Buses South Asia, mentioned that a different game will evolve for buses. “An important part of the technology roadmap is evolving in the form of BSVI and electromobility. It is necessary to watch how it goes back into the public life,” he said. Emphasising on regulatory driven processes, Chettiyar averred, “Cost will be driven up by technology roadmap, which in-turn will drive performance on the road. The performance will come from the way people will travel or how goods will move. It will also involve safety and energy efficiency. The need is to allow a developing ecosystem to have the right standardisation and scale to offer value in terms of cost.” Of the opinion that technology is not a limiting factor, Chettiyar remarked, “It may be good to be optimistic or leapfrog by crunching technology that took longer to develop in advanced markets. It would not bode well however to overlook the current ecosystem, and if there is space for investment, or if the operators know how to bring efficiencies in operations.”

Stating that it will not make a difference by putting 1000 vehicles with new technology on the road, Suresh averred, “The need would be to get old vehicles out.” Terming electric mobility as far stretched, Somasundaram S, Head – Sales, MAN Trucks India Pvt. Ltd., said that the CV industry is already leapfrogging from BSIV to BSVI in the shortest time ever for such a leap to take place in the world. “The need is to look at the product lifecycle. The BSIV lifecycle will be shorter. With the cost of operation important, a tendency to accept and quickly tackle any disruption that comes in the way is rising,” mentioned Somasundaram. Terming BSVI as the most challenging, he remarked, “The roadmap on electrification will depend on how the market accepts it, or if the right ecosystem is available. Even countries that pioneered a move to electric mobility are finding it difficult to get the right ecosystem.” Of the opinion that ecosystem takes time to develop, and will have to be economical to work in India, Somasundaram explained, “Simply enforcing it will not work.” He drew attention to BSVI technology and how the next three years will be spent doing it. “Diesel is going to have a longer life than is anticipated. For electrification, the availability of electricity has to be looked into. What happens when the entire ecosystem, shifts to electricity will also need to be seen,” he said.

Meeting the threshold

Of a clear view that technology has to meet certain thresholds, Girish Wagh mentioned that technology should make business sense. He averred, “The move to BSVI should make business sense to a customer. It is necessary for the OEM to be able to meet the government mandate. We need to ensure that the BSVI product we offer makes commercial sense to the customer apart from making business sense to us. We cannot develop every technology even though we keep track and pursue advanced developments in various areas. In the area of electrification, the technology should make economic sense to the customer. Consider the recent electric-bus tenders, the economic sense to the customer is currently linked to FAME Phase-one incentive.” Expressing that battery prices and those of the other associated bits are coming down, Wagh said, “We will cross that threshold one day for the customer. It will address the customer business part. For OEMs, the need is to have volumes because of the lack of backward integration.” Revealing that the government is looking at how backward integration can be achieved as far as electric mobility is concerned, Wagh mentioned, “Range and cost are a challenge. The two have an inverse relationship, and buses will be the first to see electric penetration.” Commenting that it will happen with the support of incentives, Wagh opined, “Intra-city transportation would be the next to see electric penetration. Intra-city goods transportation, if it will make business sense, will see electric penetration as well,“ he said.

Expressing that India has more engineers than anywhere else in the world, Erich mentioned that it is they who will offer the electro-mobility technology. Highlighting a need to change the mindset, Erich averred, “We have to invest in electrification, and now.” Stressing on the need to have a master plan in place, Nesselhauf expressed that India is behind Europe in electro-mobility. “I say this,” he explained, “is because electric trucks are already being sold in Europe and the United States.” “The gap is far more when it comes to having charging stations, and it does not help to talk about electricity from the tank to the engine, but about what energy will best serve the need. We have to think of how to produce energy. It is extremely bad if we were to produce electricity from Lignite. The BSVI engine would be much cleaner than to have an electric vehicle that gets electricity from burning Lignite,“ remarked Erich. Of the opinion that there is a need to align the incredible people (engineers) that India has, to engineer a master plan for electrification, Nesselhauf said, “The need is to unleash the capability; to unleash the potential. By doing this, there will be no need to depend on China. China is keen to be a front-runner in electrification and is subsidising it. If electricity would be the answer, diesel CVs will be found in the future. There will be scope for alternate fuels too.” Explaining that one should not think that a certain technology will last for long, Erich mentioned, “The need would be to get the cash back (ROI) before its too late.”

Regulations and safety

Expressing that there are bigger concerns than just what fuel will power a CV, Vinod Sahay remarked. “Regulations that look at other areas like improving safety need to be debated upon. Calling upon the need to align the CV industry and the government, Sahay said, “It is important to catch up with the rest of the world on the aspect of safety as well.” Stating that a large number of trucks do not have an OE cabin, Sahay expressed that a big part of the multi-axle trucks has to take the leap to fully-built safety cabins. He informed that accidents are happening because of a lot of untrained drivers are driving trucks. “There is a shortage of CV drivers in India. We (OEMs) are opening driver training schools, but there are no students,” said Sahay. Not attracting enough talent, the problem with driver profession is a problem of the society. It is a problem that the country is ignoring. Stressing on the need to introduce driver behaviour regulations in India, and which are found in Europe, Sahay opined that there is a need to work jointly. Pointing at scrappage policy, and how the country would benefit, and not just the OEMs, Sahay said, “There is no point in having polluting CVs out on the road than to introduce BSVI emission norms.”

The rising reliability of CVs requiring them to visit the workshop once or twice a year is heralding a big change. Expressing that there is a need to look beyond emissions to support modern CVs, Sahay said that doing so will be in the interest of the larger economy. Describing bus body code as a scam as it has not got implemented, Maller said, “We do not know when the truck code will come out.” Stating that BSVI CVs with bodies that do not prescribe to a certain stipulated standard would be a potential bomb on the road, Maller averred, “Some horrific accidents involving buses has led to a rise in consciousness about safety.” Responded Somasundaram S, “Utilisation of CVs is going up, and a shift towards higher tonnage is on. This will lead to the inclusion of better technology. The next two-three years will see the need emerge for vehicles that support higher utilisation. Better network reach will be necessary, and the CV industry will continue to evolve.” Suresh expressed, “The potential when it comes to buses is enormous. Mobility needs are going up since we are low per mass of people.” Stated Sahay, “The ratio tilt towards goods CV does not justify the demography we leave in and provides room for bus growth to surpass those of trucks. Stressing upon adoption of better technology, Sahay said that utilisation is going up considerably for operators to be more competitive. The allocation in the recent budget towards rural economy will prove to be a big enabler for CVs, he opined. A rise in the rural income and affordability will drive medium to long-term demand, remarked Sahay.

Connectivity and infrastructure

Expressing that connectivity is growing, Erich Nesselhauf mentioned that safety has to be pushed up, and better uptime has to be achieved. “Evolution in CVs will be very fast, and will be comparable to the evolution of mobile phones,” he stated. Informing that CV operator demographics are changing, Maller opined that bulk buying has gone up, and is triggered by an end customer looking to deal with fewer logistics partners. This, he mentioned, would lead to safer, company built trucks with the higher payload. Lauding government’s effort to curb overloading, Maller said, “Rising infrastructure will shift the focus towards larger trucks.” “The funny rule of a tractor married to a trailer should go,” Maller announced. Underlining three forces that are driving the CV industry — regulations, TCO and total operating revenue, Wagh concluded, “Total operating revenue will boost active safety and comfort, he concluded. The panel discussion was moderated by V G Ramakrishnan, Managing Director, Avanteum Advisors.

Challenges and opportunities

Q & A

Vinod K. Sahay,

CEO – Designate,

Mahindra Trucks & Buses Limited.

Interview by: Bhushan Mhapralkar

 

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Q. How do you plan to keep the excitement going at Mahindra Trucks and Buses?

A. The team at Mahindra Trucks and Buses Limited (MTBL) has done a good job. The expectations from the Blazo have been met. By and large, wherever the Blazo sold in BSIII version, the promises made by the company have been fulfilled. In this industry, at the end of the day, it is the product, technology and the core offerings that make a difference. Beyond a point, if the core is not delivering, there may not be much to do. A CV is not a lifestyle product. It has to be a profitable business for its buyer. With Blazo BSIV, we strongly believe that the delta, which we used to have earlier, has risen further. The migration to BSIV has brought about a generation change in CVs. It may not be the first time that a new emission norm has come into existence, BSIV emission norms have set a new paradigm nevertheless. The engine remained mechanical through BSI, BSII and BSIII migration. With BSIV migration, there’s not a single mechanical engine in use. It will be a world of electronics hereafter. With the move to BSIV, it is not just the electronic engine, but also the exhaust after treatment. There is an amount of after treatment required in EGR and SCR. It increases the back pressure. Back pressure will only increase further with the move to BSVI emission norms. A six-litre engine of an earlier era will no longer produce the same amount of power and torque. Efficiency, power delivery and torque will change. Coinciding with the implementation of GST almost, the migration to BSIV has signaled that a truck is going to be a far more efficient asset than it was earlier. If it used to travel 90,000 to one-lakh kilometers per year, it will now travel one and a half lakh kilometers. We have come to think that what was probably our weakness is now our strength. If our 7.2-litre engine makes us future-ready, we are quite excited. We are at a very good position right now, and will be taking the same engine to BSVI. Others may have to seek a new engine to meet BSVI emission norms. We are in a position to go forward in a much stronger way. After extensive trials we have come to conclude that our mileage guarantee stands, and in a bigger way than it did in the case of BSIII.

Q. What was the reason behind selecting SCR technology?

A. We decided to move ahead with SCR technology because it does not have any negative impact on the engine. EGR is good for a range of products where the power to weight ratio is high. In LCVs, where the power to weight ratio is upwards of 10, EGR is a good technology. In heavier CVs, where 49-tonne is pulled by a 230 hp engine, the power to weight ratio is just about four. Add the possibility of overloading, and EGR as a technology is just not sufficient. Upon adopting SCR technology, we have made an effort to be future-ready. We have chosen airless SCR, which is a necessity to meet BSVI emission norms. Airless SCR is costlier for the manufacturer, but is cheaper for an operator. Airless SCR consumes less AdBlue. Our truck will thus consume 10 to 15 per cent less AdBlue. Only one filter needs to be changed after every 60,000 kms, and it costs Rs.1200. The four year SCR cost for our truck will be Rs.7300. Frequency of filter change in air-assisted SCR is high. The costs involved are in the region of Rs.60,000 to Rs.70,000 over a span of four years. Our advantage in Blazo BSIV is even bigger than it was in the BSIII guise. We are stressing upon communicating the advantage a Blazo offers, and it is going to be a slow and steady process. Unlike industry leaders, we do not have the ability to put thousands of trucks in one go. For a challenger brand like us, we expect people to conduct a careful evaluation.

Q. What are your plans to fill up the gap between the LCVs and M&HCVs?

A. We have refreshed the cabin of our LCVs during the last two-to-three months. We have also extended ‘Fuel Smart’ technology to our LCV range. It has two modes unlike the three modes the system in the Blazo has. The light goods vehicle range gets ‘mileage guarantee’, which will be extended to light passenger vehicles. To address the gap between six and 25-tonne, we are working on a new platform that will spring up ICVs and MCVs. We plan to launch the next set of vehicles, especially in the nine to 16-tonne range in the next twelve months. The node of highest volumes in ICVs keeps shifting. Five years ago, it was in the 10.5-tonne range, today it is in the region of 13.5- to 14.1-tonne. We see volumes in three segments going forward. These would be tractor-trailers and heavy rigid trucks; trucks in the 13- to 16-tonne bracket, and 3.5- to 4-tonne segment. We will soon complete the missing link.

Q. What plans do you have to tap the growing bus segments?

A. We have been investing in buses, and have a range from 15-seater to 40-seater. In this financial year, Mahindra will launch the LPO range with 30-, 40- and 45-seat configuration. ICV platforms’ ability to come up with passenger vehicles will be explored in the second phase. We have introduced air suspension in our LCV range. The LPO range will complement the existing range of lighter passenger vehicles made at Zaheerabad.

Q. How would MTBL travel along the line of change in technology?

A. The challenge to move up to BSVI in two and half years has been taken. Alternate fuels, especially electricity, will call for supporting ecosystem. Our electric CVs will carry a lot of knowledge acquired by Mahindra Electric, a group entity. We will work jointly with them. We are working on bus projects. Heavy electric CVs call for huge investment. With electric propulsion concentrating around lighter, urban vehicles, we, as a group, do not see much challenge. We may not be ready to sell a vehicle in the market, technology-wise we will not be found wanting. Talking about cabin technology, the one that we offer is crash test certified. Termed the best, and the most modern, the cabin is also well equipped. It measures 2.4 m compared to the cabins others offer, which measure 2.2 m. AC is optional, and new e-commerce companies are opting for it. Acceptance among organised players is rising since an AC cabin improves asset utilisation. DigiSense is a connected vehicles initiative that provides the ability to talk to the driver, operator and the operator’s customer. A wealth of information is obtained. A customer operating oil tankers for Bharat Petroleum for instance can monitor his or her truck beyond the interest of the oil company to monitor its arrival and departure at its terminal. An electronically governed engine enables the ‘box’ to communicate with the engine ECU. CAN-data can be transferred, and used for remote diagnosis and prognosis. Data could be used to provide better service, and to carry out preventive maintenance. Adding huge value for us, and enhancing our ability to design a better truck, the dashboard of our truck could display CAN-data as well. Driving information could be divulged apart from fuel efficiency. When the driver stops, he can use the ‘box’ to find out a better route. Apart from geo-fencing, as and when the regulation demands, driver productivity management or driver utilisation could be incorporated. If a regulation to drive eight hours is implemented, the ‘box’ can be programmed to talk to the driver. This will call for the ‘box’ to be Wi-Fi and Bluetooth enabled. Information regarding trailer coupling and tyre pressure could be had as well. The possibilities are endless, and up to the imagination of OEM. The driver and operator should migrate to such a platform.

Q. How close are we to truly connected CVs?

A. We are not far from truly connected CVs. It is the cost that has to be justified. Regulatory push makes it easier, but the challenge lies with the operator getting the price from the consumer. What goes into a CV, someone has to pay for it. A consignor’s ability to pay for a safer truck has to be there. Considering the need for a mature ecosystem, our operating economics in BSIV is not inferior to BSIII.

Q. What growth opportunities do you see?

A. For a challenger brand like us, everything is an opportunity. We command a five per cent market share. In heavy commercial vehicles we are the number four player. We are seeing good traction in some of the segments like the 37-tonne segment, and the 49-tonne segment. In these segments our position is better than the industry average of five per cent. There are pockets where we have reached a market share of 15 to 20 per cent. The shift to BSIV has increased our competitiveness. We see a big opportunity in truck body code. Over 65 per cent of what we sell are fully-built vehicles. The sale of BSVI CVs is expected to begin from December 2019 itself. This gives rise to two issues – ROI and the ability to operate BSIV CVs. With BSVI at the doorstep, migration to larger engines will be faster. Engine back pressure will rise. We will stick to our current engine and airless SCR with some additional bits thrown in to meet BSVI emission norms. In LCVs, we will have a mix of EGR and SCR. The power to weight ratio will help to decide.

Q. As competition gets fierce, and ways of working change, what group synergies would you look at?

A. Synergies for us come out of various things. They are about technology mostly. Digisense is a result of synergy. Common-rail diesel engine is another example. There’s much synergy at the supplier end. Without synergies we would not have been as cost competitive. With the entire auto business indulging in common sourcing, the chances of dealing with the same vendors increase. Synergies at the back-end and front-end provide an advantage. Front-end synergies involve dealers. About 25 per cent of the dealers are common to our farm or auto businesses. The facilities are independent but the owner is the same. He gets the advantage of a common back-end, and we get the advantage of familiarity. In service, we are exploring synergies where smaller, lighter and heavier commercial vehicles share the same service center. It saves overheads for the dealer, and we are able to have a better reach. We have synergies with our finance arm, Mahindra Finance, which has a share of 30-35 per cent. We seek synergy with Mahindra Research Valley for development of technology.

Q. Would a new engine be developed for ICVs?

A. Some of the current engines will be upgraded. We will also make new engines out of our portfolio of engines.

Q. How do you plan to keep the suppliers and dealers motivated?

A. We believe that what applies to our employees, also applies to our partners. Satisfaction necessarily does not come from money, it comes from the level of engagement. We have scored high in the J D Power survey despite having come out of red just yet. We have scored much ahead of the Tatas and Leylands of the world. The biggest reason for this is the way we treat our channel partners; treat their problems as ours. If you speak to our channel partners, they will talk about the confidence we have given them. We make an honest attempt to solve their problems. Our partners have been with us through the worst times. Most will today indicate that the light is visible at the end of the tunnel. Most of them are raring to go. I wouldn’t say that it is a job done. The process is constant. Players like us can’t take things for granted. We can’t rest on the assumption that our dealers are making good money. Most of them are not. Most of them have just about turned profitable, or have broken even. They have some way to go to recover their past investment. We operate with a thumb rule of full honesty. We tell our partners that let us solve your problems together. We don’t commit that we can solve them 100 per cent as part of it is within our control and part is not. Some things are out of our control because of the way things are happening in the industry right now., which leaves very little retention to most of our dealers’ kitty. We are expanding our dealer network on a need basis largely. Due to our innovative approach to overcome service challenges, we have achieved good results. The service guarantee, for example, we offer on the Mumbai-Delhi corridor. No other player has been able to give such a guarantee. We are stressing on technology and low cost innovation to solve some of our problems. We do not ask dealers to invest beyond what is required. We tell them to keep room for scaling-up the operation when the need arises. In some areas, single digit expansion could happen to fill up the network gaps in this and the next fiscal. We are looking to expand the service guarantee to other Golden Quadrilateral corridors. For the other corridors, and the east-west corridor, our commitment of 48 hours remains. We have 11 parts plazas. At the end of this year, we are looking at crossing 80.

Q.What are your export plans?

A. Under the Auto and Farm sector at Mahindra, we have identified two major geographies – South Africa and South Asia. We have a group-level team looking after these. We support them. In the two geographies, distributors have been appointed. Our focus right now is on the domestic market.

Q. What is your forecast for the CV market?

A. In terms of the quarters, it is very challenging given the current situation. A report mentions that India will be the fastest growing economy till 2025. If the economy grows, commercial vehicles will also grow. There are intermediate challenges. GST is a two-way sword when it comes to commercial vehicles. It will increase the efficiency of existing fleet. It will also add to over capacity in some sectors. It will therefore take three to four months before the order is set. Operators will also evaluate. If the truck were to run 7,000 km a month, it would now run 10,000 km. The operator will evaluate fleet utilisation. He will evaluate how many new trucks are required. Most are re-calculating as the earlier thumb rules are no longer effective. There could be a momentary challenge over two-to-three months. The unfortunate bit is, it gets coupled with the lean season. There is a likelihood of short term stress. In the medium and long-term there is no need to worry. The BSVI migration will haunt the industry next.

Vinod Sahay to lead MTBL as the new CEO

Vinod Sahay to lead MTBL

Vinod Sahay, Chief Executive Officer – Two Wheeler Business, Mahindra and Mahindra and Director Peugeot Scooters will now lead Mahindra Trucks and Buses Ltd. (MTBL) as its new Chief Executive Officer (CEO). He takes over from the current CEO – Nalin Mehta. The shuffle is said to be part of the ‘normal talent rotation’ process according to sources at the Original Equipment Manufacturer (OEM), with more changes expected to be announced soon. Vinod Sahay joined Mahindra in June 2015, and is claimed to have played a key role in MTBL holding onto the market share in Medium and Heavy Commercial Vehicles (M&HCVs).Sahay’s position at Mahindra Two Wheelers will be filled by Prakash Wakankar, CEO, Mahindra Retail. Additionally, Harish Chavan, who led the farm business division at Mahindra’s Farm Equipment Sector, has been made Chief Operating Officer (COO) – International Operations. Chavan’s position will be taken by Pankaj Sonalkar, Head – Mahindra Vehicle Manufacturers. As part of the new structure, Vinod Sahay will report to Rajan Wadhera, President – Automotive Sector & Member of the Group Executive Board ,Mahindra & Mahindra Limited. Both Chavan and Sonalkar will report to Rajesh Jejurikar, President, Farm Equipment Sector. While the changes come into force with immediate effect, Vinod Sahay is expected to work in tandem with Nalin Mehta for a few months before he takes complete charge under his new role as the CEO.