Q & A
T. Venkatraman, Senior Vice President – Buses, Ashok Leyland Ltd.
Interview by: Bhushan Mhapralkar & Bhargav TS
Q. Ashok Leyland leads the Indian bus market. How do you plan to maintain the leadership status?
A. Bus business is tricky in India. The business curve can fluctuate wildly. Ironically, the 7.5-tonne and above segment has not reached a 50,000 count yet. It is swinging between mid-30,000 and higher-40,000 (units). Typically in another segment, it would be easy to say that there is a growth of 10-12 per cent year-on-year for three-to-four years followed by a decline. In buses this is not the case. The segment that I am in, is 7.5-tonne and above, and is also referred to as Medium-Duty Bus (MDB) and ICV. The MDB used to bring 60 per cent of the total bus business. It included players who bought chassis and built the body. The trend has reversed. Smaller vehicles – the ICV segment, has grown to 60-65 per cent. There are three reasons for the shift. One is the emergence of metros, monorails, etc. as people look at last mile connectivity. Second, with the bus code coming in, the bus operators don’t know how much to invest. They can’t experiment with the bus anymore. They have to follow a bus code. The buyer needs to come back to the manufacturer and ask for fully-built buses. Third, the bus industry is shifting towards an understanding of controlling the atmospheric pollution; of controlling the noise pollution, and the need to address the running of a vehicle. This is especially the case with State Transport Undertaking (STUs). Every STU almost, is incurring losses. They wait for the next government to announce a scheme, pay the last manufacturer and move on. They are thus constantly paying the previous transactions.
Q. How are you tackling the three challenges that you just mentioned?
A. Consider the school bus segment. It accounts for roughly 30-32 per cent. Historically there have been players who converse between the LCV and ICV segment, which is roughly the 28 to 32-seat capacity segment. Almost, all the competitors have a presence here. We decided to bring in a product which is a game changer. So we spoke to all the stake holders. We spoke to the parents; we spoke to the operators; we spoke to the school management; we spoke to students. We asked them of what they typically look for in a vehicle. Some three or four dimensions came out of it. The school bus that we launched at the Auto Expo 2016 thus has many firsts. The vehicle is non-conflicting when it comes to the operator needs. A highly competitive per seat market, the need was to seek the best balance. One cannot compromise on safety, security and hygiene, and at the same time has to match the costs. Once the platform is created, it can be extended to staff, tourist; it can also go downwards in terms of 50-, 40-, 36-, 32-seats and so on.
Q. What about the segment where buses like the Hybus are aimed at?
A. The government is talking about changing the paradigm in terms of atmospheric pollution, noise pollution among others. Last year we launched an electric vehicle, which came into the country ahead of anyone else. The ministries have not yet structured their intent. So, we decided to look at the challenge of acquisition cost. The Total Operating Cost (TCO) is about first buying a bus, operating it and then judging it. So, I can talk about theoretical TCO. This is work in progress. We looked at what would make sense for the country. Here’s a person who says that he needs a vehicle that runs on CNG or diesel. Then, he says that give me something that also meets the other side of the spectrum, which is noiseless, pollution-free, has more seats and makes for the ‘right’ city traffic application. The Hybus, with an ultra-capacitor, works such that the ultra-capacitors are charged every time the bus brakes in a city environment. In a city environment there is frequent stoppage and start. When the vehicle is running the ultra-capacitor is getting discharged. The Hybus is regenerative and ‘last the lifetime’ kind of a vehicle. There are no batteries; no thermal over-runs. There are no issues with respect to chemical reactions. It is a completely safe option. Since it is serial-based, the powering source can be a diesel or a CNG engine. A diesel engine can be replaced with a CNG engine. The Hybus is a modular product and makes a lot of sense where there is no need for a huge acquisition cost. It does not need an electrical infrastructure; it does need a pantograph, or a charging station. It also avoids a malfunction that could cause a vehicle to stall on a BRTS circuit, choking the whole network. If there’s a problem with the other part, it can shift to diesel and keep moving. With such products (the innovative school bus and the Hybus) we will engage with the government on how do we take it forward. The Hybus, for example, makes a perfect bus for Delhi; is air-conditioned and can have standees as well as those who are seated, and is noiseless.
Q. With buses looked upon as a socialist cause, they seem to be tightly controlled by permits which differ from region to region. Do you see any streamlining opportunity?
A. The State Transport Undertakings (STUs) are the backbone of the bus industry. Almost all of them are facing hard financial times. They have aged vehicles, which somewhere down the line start to breakdown. There’s a limit to how much a vehicle can be flogged. The government is under pressure to recognise this. When elections take place, it is the buses that are on the agenda; about having started these new routes and so on. The Ministry of Road Transport and Highways (MoRTH) is talking about modernisation; they are talking about a national transportation association. They are talking about structuring – depending on the metro station; the population, and upon how big the bus will be. What type of a bus will it be. Will it be a premium segment bus; will it be an AC bus, or will it be a low floor bus. Will it be an ultra low floor bus. They are trying to define everything. I expect the MoRTH norms to state the intent at least. State if the focus is on last mile connectivity. If the focus is on corridors; on licenses. The sleeper coach is currently under discussion. Every one of these are indications in the right direction. The concern for a manufacturer is that I have created a product. I am ahead of the curve, but my investments are not yielding a return. How long can a manufacturer stay motivated. The good part is, we are seeing changes in the right direction. The discussions are taking place in the right direction. The confusion is ethanol, bio-diesel, bio-gas, hydrogen, series hybrid, parallel hybrid, full-electric, and induction motor electric. There are so many combination options. Which is the right one for the country? Which is the one that will cater to the requirement? These are the challenges.
Q. Will bio-fuel alternatives succeed?
A. BRTS is an option for certain scenarios. It takes out a lot of small cars from the roads; reduces congestion, and makes an economical option. For this to happen, the quality of buses has to improve. The quality of seats, what is offered inside the bus, the feel that you get inside a bus has to improve too. There are good examples of BRTS corridors. Where land is available in abundance, and a multi-way option is available, or where you are starting from the grass route level, this is the business model available. STUs that are not able to churn this effectively, work under the PPP (Private Public Partnership) model where the government participates minimally, makes it attractive for an operator. The issue is, an operator is guaranteed profit by charging Rs.3.50 instead of Rs.3, which is the cost incurred and includes the acquisition cost. Governments are populists, and wouldn’t increase the ticketing cost. It will change however as people are willing to pay for travelling by coaches. Consider this: the law does not have a clear agenda on sleeper coaches, national permits, or route allocation. How will it play between government and private segments. The operator is scared to enter. The government is not clear of whom to keep out. Recognising these issues and sorting them will also help the common man by bringing down the cost per ticket. The need is to have a business model. The need is to begin working with an operator; with the manufacturer for the kind of buses needed. This would help to make exactly what is required. Today, a manufacturer is trying to conceptualise what may be required, or it is someone who will buy a chassis and adapt it to a commercial application.
Q. How do you look at BRTS networks being pulled down; city bus undertakings once regarded as the best struggling to survive?
A. The question is, how does an STU pay for a vehicle. STUs have to pay for the upkeep. They have to pay the salaries of their staff. So, how do they modernise themselves. Their strategy is to squeeze the so-called golden goose. Manufacturers are called, asked to quote and meet on the price. Every time there is a price meet, it comes down to the comfort offered. If the specification is unified, and every one has to offer a product meeting these, then it is an interesting challenge. There is a need to ensure that a common man feels like getting into the bus. Look at England. We have a brand there called Optare. Look at the people travelling in these buses. Most are in the upper range of 50 plus. For the elderly, this has become the most viable option because the buses are comfortable and safe. They are elderly friendly. People prefer buses over cars. I have a whole host of buses in the upper and luxury end. I can take them higher up where they contain super air-conditioners. As a market leader, the need is to look at numbers. To be in the Top five globally, I also have to look at the world market.
Q. How do you look at the inter-city coach segment in view of the growth in infrastructure?
A. This segment is 600 units strong. Look at the number of players participating in the segment. It is a nice showcase of capability. Will one be profitable after doing the investment? If there’s a player who has a product in the rest of the world, brings it to India and positions it, it is easy for him. For a new player to invest and aim to grab 10 per cent of the market it is not economically viable. However you look at the potential, and if the government redefines national permits, the market will grow. As a manufacturer, my stand is, I have a product that I can make. I have a good understanding of the market and can respond quickly. In the next few months or by the end of this year (2016), we will launch a coach. An interesting part is, manufacturers like Volvo changed the perception such that the engine would need to be overhauled after 10 lakh kms. Take a gearbox and overhaul it once in the lifetime of the vehicle. The game has changed. The coach is here to stay. We have a rear-engine vehicle but as of current, a front-engine vehicle is preferred. I want to be among the top five in the world; I have to be the number-one in the country, and I have to show that I am capable. People are yet to understand the cost of operation. Funding is a challenge, and it is necessary that the government works towards financing the operators. If the funding challenge is dealt with, the market will open up.
Q. Would the coach be made by Global TVS?
A. Yes, the new bus will be made by Global TVS. I want to ensure capacity fulfillment. I have a plant in Alwar. I have a plant in Viralimalai. Both these plants should meet the demand of north and south. The Alwar plant does 60 vehicles a day, and can be made to produce 20-22 more vehicles a day. Four to six coaches can be made. Expansion is on, and if the industry shifts by 18 to 20 per cent, or if Ashok Leyland is successful in growing the export market considerably, which it wants to, the hike in capacity will come handy.
BRTS is an option for certain scenarios. It takes out a lot of small cars from the roads; reduces congestion, and makes an economical option.
