We are working on various initiatives including digitising our entire sales operation: Vinod Aggarwal, MD and CEO, VECV

by Kiran Bajad Dec 19, 2017

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The Gurgaon-headquartered VE Commercial VehiclesVinod Aggarwal, managing director and CEO speaks to Kiran Bajad on the response to the new Pro 5000 series of 16- to 40-tonners, making headway in the fast-growing 37T segment, entering new export markets and the first-mover advantage it has from manufacturing Euro 6 engines at its Pithampur powertrain plant for Volvo Group.

First off, how do you view the current scenario in the Indian commercial vehicle industry and what is your near-term outlook for the sector?

Over the past eight to nine months, the industry has experienced a tough time. There are various factors which have impacted growth, starting with demonetisation, the transition from BS III to BS IV, and the latest tax reform — GST. These disruptions, one after another, have resulted in the tough market situation. Having said that, one can say with confidence now that the difficult time is behind us and things will start getting better here on.

Hopefully, the industry should start recovering given the reforms which are good for the longer term and other macro-economic factors like improving infrastructure investments, GDP outlook, and a bountiful monsoon. The sole concern is that private investments have not been happening due to the uncertainty in the economy and the NPA problem of the banking system.

Till June, there was a drop in sales of commercial vehicles across categories including exports. However, sales in July 2017 have seen some recovery but we will have to see how the markets move, given that the festive session is just around the corner. I believe the market should be positive due to infrastructure spending and the better monsoon season.

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The new Pro 5000 series of BS IV, 16- to 40T GVW, heavy-duty rigid haulage trucks, tractors and tippers aims to deliver top-notch reliability and optimised operational costs. It is priced between Rs 16-28 lakh, depending on variant and the technology platform (EGR or SCR).

As a CV player, how do you view GST and its impact on the transport and logistics industry?

GST certainly has been one of the biggest and positive reforms in the country. This is especially good news for the commercial vehicle and transport industry. The efficiencies, productivity and entire supply chain will improve significantly and this reform has a wide-ranging impact. For example, before GST, we were operating depots across various states; now we don’t need them in all the states. Instead, only five depots across the country would be enough to cater to markets across the country.

Improvements like these will help cut a lot of wastage in the system and increase efficiencies. Initial reports suggest that transporters are saving almost 25-30 percent of transportation time, which is really encouraging for the industry.

The CV industry has upgraded to new BS IV emission norms from April. What has been the impact of this transition and how is the market reacting?

The market is getting stabilised and BS IV is fully in place now. The industry had some issues with the rollout, especially when sales dropped in the first quarter of FY2018; not everybody had anticipated this but all that is behind us now. As far as VECV is concerned, we were ready  for this transition and successfully moved from BS III to BS IV. As we keep very small inventories in our plant and with dealers, there wasn’t much of an impact on us overall.

What were the highlights of VECV’s performance in FY2017 and in the first four months of FY2018? What is your near-term outlook?

We have been consistently gaining market share, whether it is light duty, medium duty commercial vehicles, buses or exports. In FY2017, we grew our market share in all segments – in the light and medium duty truck segment we are now at 33.5 percent market share, 5 percent in heavy trucks, and 11 percent in buses. Exports were also the highest for us last year — we sold 58,500 trucks, both Eicher and Volvo brands put together. Last year was our best year in terms of sales. We saw good growth and grew more than the industry. As I said before, the first quarter of FY2018 was down but there has been a recovery in July 2017. I expect the market to further recover in the next eight months, especially with the festive season starting this month.

What are the key growth strategies that VECV is working on and what is the focus area?

We now have the widest range of products available, all of them BS IV-compliant. We have value and premium products in our portfolio. There has been an extremely good market response for our products and our focus continues to be to offer value products to our customers. The second area of focus continues to be improve our aftersales and response time to the customer and offer the best service. We are working on various initiatives including digitising our entire sales, which should help us perform better in the near-term. We have nearly 280 3S dealerships, which are our main touch-points, across the country. Apart from this, we also have trained mechanics, parts sales outlets and special workshops, offering a comprehensive sales and distribution network to serve customers better.

VECV launched the Pro 5000 series of heavy trucks in April. How is the initial market response?

The Pro 5000 is the latest range of products ranging from 16-40 tonnes which we have introduced with i3 EGR technology; it comes with new Engine Management System (EMS) 3.0 technologies from the Volvo Group. The trucks have an intelligent driver information system, fuel coaching, cruise control, engine protection system, telematics and best-in-class fuel efficiency. The product has been well received in the market. With the old VE Series trucks, Pro 6000, Pro 8000 range and now the Pro 5000 Series, we have got products across every price point, application and every customer need, and with the widest range of engines equipped with both EGR and SCR technologies. We are capable of meeting all customer needs.

In mid-2016, VECV introduced the Pro 6000 series 37T truck. The 37T segment has been growing rapidly. How is VECV performing here and what is your market share?

We have been performing well in the 37-tonne with our Pro 6000 truck. Customers who have bought these vehicles are getting higher fuel efficiency and better turnaround time. These trucks have the most advanced features which are helping customers in several areas. Today, the market demands basic trucks but, with the improving infrastructure, it is slowly and steadily graduating towards value trucks. GST should also lead to more demand for high-tonnage rigid trucks and a superior future for value trucks. We have been consistently gaining market share in this segment. Last year, we sold 1,600-2,000 Pro 6000 trucks and in April-July 2017, we have sold close to 300 units.

In early 2016 you forayed into the sub-5T LCV segment with the Pro 1049 mini-truck? What are the growth opportunities here?

This truck is helping us gain market share and today we have close to 20 percent of the market in the sub-5T segment. Though the segment is not very large – around 1,000 units per month – we are selling nearly 200 units per month. This is a truck for city transportation, for last-mile connectivity and helps manoeuverability in narrow lanes inside cities. This truck has also been optimally designed to give maximum area for loading.

Are you looking to enter lower segments in the LCV market?

No. We are not looking at below these segments but we can certainly look at the different variants in this segment. We don’t plan to get into the smaller segments. Right now, we are catering to the 4-5- tonne segment and won’t be coming below 4T. In the light and medium duty segment, our trucks are known for their fuel efficiency. In the 10-15T segment, our market share is nearly 33 percent. We will continue to grow our share steadily in this segment. Over the past 7-8 years, we have been gaining share every year by almost one percent.

Are you looking to expand the export business?

Last year we exported more than 8,000 trucks and buses to India-like markets. Going forward, we plan to enter into South Africa as well as South East Asia. We have already launched our products in South Africa and by end-2017, we will enter Indonesia.

Besides this, other target markets are the whole of Africa as well as the Middle East. We export more trucks but buses have also seen some uptick. Our target is to maintain 15-20 percent of contribution to our overall sales by export markets. We are growing our overall business and exports will continue to grow with this.

We are also exporting Euro 6 engines to Europe and are an exclusive manufacturing hub for meeting demand for Volvo’s medium duty trucks. We ship 1,500-2,000 engines to European markets each month and this number will likely to go up. These engines are highly localised and in terms of value, nearly 10 percent is imported content.

How is the bus business faring?

We have a market share of 17 percent. We are very strong in the school bus segment and are expanding our presence in staff buses. We plan to get into the route permit for satellite towns. We are also working towards getting more of a presence in the state transport undertaking business. Last year, we received a big order from Karnataka and are currently executing it. We have our own in-house body building facility and are improving the quality of the buses we manufacture.

India has set an ambitious target by leapfrogging to BS VI by 2020. Since you already make Euro 6 engines in India, doesn’t it offer you an edge?

Yes, we have a huge advantage given that we have already built the expertise (VE Powertrain at Pithampur, MP, makes five- and eight-litre engines for the Volvo Group). We have been already working in this direction and a lot of progress has been made. We are also making new investments towards the BS VI challenge.

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This interview was first published in September 1, 2017 issue of Autocar Professional.

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