2012 Commercial Vehicles Special: CV sector awaits reprieve in Budget '13
The apex industry body is asking for funding and subsidies to be given to STUs to fund bus purchases as well as they have no funds for such big vehicle buys.
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Commercial vehicle manufacturers could do well to wait for Budget 2013-14 for a much-needed reprieve and a bailout from the current slide in their fortunes. The Society of Indian Automobile Manufacturers (SIAM) has submitted a recommendation package to the Centre that aims to prop up the CV industry and help get it back onto its feet.
The proposals were discussed recently at a meeting of the representatives of the National Manufacturing Competitiveness Council, the Union ministry of heavy industries, the ministry of trade and commerce, as well as SIAM members. Though the proposals were recommended for incorporation in the last Budget as well, they did not see the light of day. Hence, SIAM is optimistic that the prevailing slowdown and dip in sales and growth rates, particularly in the medium and heavy commercial vehicle (M&HCV) sector, this fiscal will prompt the government to take proactive measures to breathe life into the system.
Some of the recommendations include a fleet modernisation programme and suitable incentives for it like VAT that will necessarily spur new purchases by state transport undertakings (STUs) and private organisations after disposing off 15-year-old polluting trucks and buses.
In an austerity drive undertaken by the Centre some months ago, a circular from the finance ministry to all ministries has put a stop to all vehicle purchases, further jamming the spanner in the growth of the auto sector. Other demands of SIAM include rollback of excise duties to their pre-Budget level of 10 percent. The excise duties on CV chassis had been increased to 14 percent plus Rs 10,000 and on built-up CVs to 12 percent in the last Budget. Other proposals pertain to extension of the Jawaharlal Nehru National Renewal Mission (JnNURM) that offered the much-needed bailout to bus manufacturers in terms of purchase of new buses by STUs pan India during the last slowdown and is expected to trigger fresh purchases of CVs, says Vishnu Mathur, director general of SIAM.
The apex industry body is asking for funding and subsidies to be given to STUs to fund bus purchases as well as they have no funds for such big vehicle buys. Under the last JnNURM, STUs had bought around 10,000 city buses. SIAM has proposed that in the extension of JNNURM, inter-city buses should also be considered. A proposal of the ministry of road transport and highways in 2009 had suggested a similar scheme for long-distance buses, but the proposal faded into oblivion as the scheme was not pursued.
Another industry dampener has been the November 2012 SIAM results. The overall CV industry grew only 2.73 percent between April-November 2012 compared to the same period last year. While M&HCV sales fell by 6.34 percent, the LCV segment grew 16.98 percent. In November 2012, M&HCV sales fell 33.22 percent compared to November 2011. Exports also fell by 1.37 percent in April-November 2012 while in November alone, the drop was 21.50 percent. The CV industry grew at a CAGR of 11.59 percent in the last five years.
It is not difficult to pinpoint the reasons for this lacklustre performance. The slowdown of industrial growth and GDP, increasing inflation, trade and fiscal deficits of the government due to which it has mopped up all additional liquidity in the system impacting the economy, volatility of the rupee versus the US dollar that has stalled the inflow of foreign funds into the country are all contributory factors to negative market sentiments. To some extent, the increase in diesel prices has also affected consumer demand while the rise in freight rates has forced transporters to defer new vehicle purchases.
Stimulus package for M&HCVs called for
In view of the sluggish market, all new infrastructure projects and construction activities have been temporarily put on the backburner. Similarly, mining that was an important means of livelihood for the sector is still in complete disarray. There is a stalemate following the coal bloc scam. Land and environmental clearances still await the Centre’s approval as the government has not been able to pass the land acquisition bill in Parliament.
According to Vinod Agarwal, CEO, VE Commercial Vehicles, if the bill is not put in fast- forward mode, coal cannot be extracted from the mines. People living on those lands have to be moved for which the Land Acquisition Bill and land reforms are required.
Similarly, the fall in investments in infrastructure, ports, airports and road construction results in lesser movement of cement and steel and fewer trucks for construction activities. Therefore, the captains of industry are clear that the need of the hour is that government announce a major stimulus package for M&HCVs that involves new infrastructure projects in the form of new road and highway projects as well as open up mines to create demand and get truck movement back on track.
Small is big
While the M&HCV industry was largely impacted by macro-economic factors, the light commercial vehicle (LCV) segment, especially small CVs (SCVs), has had a story of its own. Being a generator of jobs, LCVs are not dependent on overall industry growth. This, together with perceived growth potential in terms of the sheer size of the employable population in India, is contributing to its continued growth.
A strong hub-and-spoke model, opportunities arising from restrictions on movements of heavy trucks in the major metros, the increasing focus of businesses on last-mile connectivity coupled with healthy demand from rural markets are some of the drivers behind LCV sales.
“A significant development is the emergence of young rural entrepreneurs – ‘sons of the soil’ who have displayed their acumen for establishing and running their own businesses. It is this group that sees LCVs as a sound value proposition that will enable them grow their business. Going forward, while the LCV segment will further continue to show positive growth, the M&HCV industry will look for signs of recovery in economic activity to get out of the negative zone,” says Pravin Shah, chief executive, automotive division, Mahindra & Mahindra. While the short-term outlook looks difficult for M&HCVs, Tata Motors is optimistic that government will introduce measures that will stimulate reform and revive growth.
So are CV manufacturers taking any special marketing initiatives to boost sales in the interregnum? Tata Motors, for instance, recently launched a new corporate campaign with the message, ‘Ek Kadam Aagey’ an indication of its resolve to stay ahead of the curve, and a step ahead of customer expectations. The campaign showcases Tata Motors’ range of existing and ready-to-be-launched CVs. A renewed emphasis has also been placed on the company’s aftersales service, Ravi Pisharody, executive director - commercial vehicles told Autocar Professional.
The company recently announced plans to roll out 25 offerings in the CV segment over a year of which six form part of the Tata Ace family. A new variant based on the Ace platform is slated to debut in January. The Ace recently clocked sales of a million units seven-and-a-half years after its launch and the target for crossing the next million is a shorter timeframe.
Force Motors, on the other hand, will be focusing on expansion of its network to improve customer service as well as the quality of processes and systems to improve the overall customer experience at dealerships, besides the regular marketing reach and initiatives. “We are expanding our product portfolio to capture new customer segments and to provide an extended association for existing customers whose needs may have changed," says Naresh Rattan, COO and president (corporate sales and marketing).
Force Motors recently launched its new 26-seater Traveller minibus that was originally designed by Mercedes-Benz and adapted by Force. It can be used for several applications including pick and drop, hospitality, medical services and tourism. The company plans to strengthen its current market share in the midsize segment from 50 percent. Competitors include Tata Motors and Eicher Motors with over 37 percent and 13 percent share respectively. Another key player in the LCV segment with its Maxximo and Genio LCVs is Mahindra & Mahindra that is driving sales through finance and exchange campaigns. Its focus is on value-added services like maintenance packages, mobile service support and referral programmes. Besides, the network of Mahindra Finance and Mahindra Farm Division is being leveraged for the sale of its SCVs and sub-one-tonne products through their outlets. “Going forward, we will ride on a low-cost technology in our quest to provide a unique purchase experience to an LCV customer through mobile phones and low-cost tablets,” adds Shah. In the LCV (goods carrier) segment, M&M holds a market share of 30.57percent (April-November 2012).
For Ashok Leyland Ltd (ALL), another big CV player, the coming few months will be very critical as it has a slew of new product launches planned as it strengthens its brand and network building across the country, as well as forays into new markets worldwide. A couple of months ago, it celebrated the first anniversary of the Dost, its LCV jointly produced with Nissan.
To commemorate the event, ALL launched a limited edition Dost in Tamil Nadu, Karnataka, Kerala, Andhra Pradesh, Maharashtra, Gujarat, Rajasthan and Goa. The Dost is the leader with a 31 percent share in its category in these markets. Since its launch in September 2011, ALL has sold 21,829 Dosts till November 2012.
Notwithstanding the downturn, ALL also introduced a range of haulage trucks fitted with twin-speed rear axles (that can increase fuel efficiency up to 10 percent) last month at Namakkal. Deployed on 25- and 31-tonne trucks in both 6x2 and 8x2 configurations, the new set of technologies have been customised for ALL’s driveline with the twin-speed axle being the primary change.
While the market is still to look up, CV makers are also investing in upgrading skills including driver training programmes. India ranks among the highest in the world for road fatalities at 120,000 per annum. There is also a huge shortage of trained drivers. The National Skill Development Corporation (NSDC) has estimated a demand for over 50 lakh drivers, over a period of 10 years. The CV customer has also been evolving with higher expectations from the OEMs. Hence, CV makers are doing all to keep him satisfied.
In this respect, M&M conducts the ‘Do it Yourself’ training programme to train owners on the basics of routine vehicle maintenance. It also conducts driver training camps to provide customers basic technical know-how. Tata Motors, through a special professional driver training initiative called Kaushalya, has a two-pronged strategy: address road safety and for provide employment opportunities to the youth.
The company has invested in the Punjab State Institute of Automotive and Driving Skills (SIADS) at Mahuana to provide support in the form of designing course content, technical assistance and know-how, guidance, vehicles, training aggregates and teaching aids. The objective is to provide training to the youth of Punjab and, in turn, make them more employable. It also launched a CV Driving Centre in Jabalpur in August 2011 to impart training in driving both LCVs and HCVs. Through this initiative, Tata Motors hopes to train over 3.4 million youth by 2021 and thereafter, a million every year through 1,600 driver training centres.
While there are no plans in the pipeline for any special training schools for Force Motors, it is a possibility that may be explored in the future.
In Europe, professional driver training has been part of every OEM's portfolio for years and even companies such as Shell offer fuel-saving programmes. Realising this, ALL established a driver training institute at Namakkal which follows a comprehensive training course based on the syllabus specified by the Central Motor Vehicles Rules. Apart from lessons in driving theory, traffic education and vehicle maintenance, trainees are also schooled in public relations and soft skills and must take an additional course in first aid.
The CMVR requires that actual driving hours be not less than 15 hours, and trainees at Ashok Leyland Namakkal are given 55 hours of steering practice. An important aspect of the training emphasises fuel-saving techniques.
Eicher in turn has been honing driving skills through the Eicher Driver Training School at Pithampur which covers safety and fuel conservation aspects. Driver training programmes are also conducted at all its dealerships. A special driver’s manual has also been designed in Hindi and other regional languages. The training programme encompasses classrooms as well as practical lessons, according to A Nandakumar, head of customer service, VECV.
So it is clear that while the economic slowdown continues, CV manufacturers are not sitting idle. They are busy investing time and energy in upskilling workers and planning new products for the new year that opens a fortnight from now.
INTERVIEW WITH RAVI PISHARODY, EXECUTIVE DIRECTOR — CVs, TATA MOTORS
Which are the new models that Tata Motors plans to introduce in 2013 and in which segment do you see growth over the next three years?
There are several models and variants planned for launch by Tata Motors across CV segments. These launches are slated to take place over the next two quarters and will include variants and upgrades from the Ace family, the all-new Ultra and Prima range as well. Growth in the LCV segment will continue over the medium-term. However, growth of the M&HCV segment is related to an overall economic recovery, which is hard to predict, and we are thus cautious.
How has the CV segment grown for Tata Motors since 2010 and what have been the challenges?
Over the last couple of years, we have grown our market share and offerings in the CV space. Vehicles such as the Prima, Xenon 3118, and Magic Iris have fulfilled crucial need gaps in the Indian transportation and the logistics scenario by bringing in the much-needed technologies to India. Over the last couple of years, we have introduced many variants of the Ace, two of which are the half-tonner Ace Zip and Magic Iris.
What is your current market share?
M & HCV segment for Q2 FY12-13
Buses & Trucks - 59.8%
Trucks - 67.1%
Buses - 42.6%
Buses for Q2 FY 13
Medium & heavy - 42.6%
Light & small - 51.0%
SCVs, LCVs, ICVs, Pick-ups for Q2 FY 13
SCV - 78.5%
LCVs - 79.9%
ICVs - 48%
Pick-up - 20.5%
How is Tata’s exports performance and which new markets are you planning to tap?
We plan to continue our focus on and sustain our presence in the markets we are already present in, though plans are to enhance our presence in emerging markets, with a focus on ASEAN, Asia, Africa, Middle East and Latin America, on the back of a new range of products like the Xenon, Super Ace, Prima and the Ultra range of trucks.
We are currently evaluating the feasibility of setting up manufacturing locations to cater to select geographies outside India, with a view towards bolstering our international presence.
INTERVIEW WITH PRAVIN SHAH, CHIEF EXECUTIVE, AUTOMOTIVE DIVISION, M&M
How do you perceive the major challenges in the CV sector today?
Besides macro-economic factors, regulatory bottlenecks pose a significant challenge to the CV industry. Inconsistencies with respect to aged vehicle replacement and issuance of fitness certificates are creating headwinds. Moreover, fragmented regulations in key states with respect to registration of vehicles, tax structure, amongst others, have also affected demand. A robust regulatory framework, increased public spending on infrastructure (especially road transport) and introduction of game-changing fiscal measures such as GST can pave the way for a more conducive operating environment for manufacturers and customers alike.
Recently, the GM-SAIC-Wuling partnership put plans on hold for LCVs and Volkswagen has said it has currently no plans to introduce LCVs in India. However, Tata reached a milestone in Ace sales recently. So what does this portend in terms of new players mulling entry to India?
Overall LCV volume and growth figures suggest that this industry is growing in size and scale that makes it attractive for new players that wish to enter. Having said that, every new entrant will have to go through the learning curve of establishing wide sales and service reach and develop products with sound operating economics, over a period of time.
Current incumbents with credible brand equity, proven products and significant coverage with a deep understanding of local nuances will continue to hold an edge in this scenario. It is also important to recognise the peculiar mindset of a typical customer in this space.
People in this segment will not experiment too much and will purchase only proven products that offer a good value proposition. They look at operating economics, re-sale value and widespread sales and service footprint along with the availability of spares, while deciding on their purchase.
How has the CV segment grown for Mahindra & Mahindra in the last three years and what have been the challenges?
The last three years have seen the successful launches of Bolero Maxi Truck, Genio, Maxximo and Gio. During this period, we have grown at a CAGR of above 30 percent in this segment. Each new product was developed and launched with structured insights and keen understanding of customer needs. Like, in the case of any new commercial vehicle, the challenge was to build and now sustain brands which offer a solid value proposition to the customer and make sound business sense. This is a segment where word of mouth and referrals play a pivotal role. To this effect, the past few years have seen us expand our sales and service footprint at a rapid pace with the end objective of developing a condusive eco-system for our prospects and customers.
INTERVIEW WITH NARESH RATTAN, COO & PRESIDENT (CSM), FORCE MOTORS
How do you view the entry of new players in the LCV space?
The Indian CV market (for 2011-2012) is divided with SCVs at 42 percent, LCVs with 12 percent, and M&HCVs with a 46 percent share. Broadly in goods, M &HCVs cover the mail routes that are hub-to-hub while the LCVs cover the hub to spoke. The new growing category, SCV, covers spoke to retail that covers the last mile or the narrow lanes. In the passenger category, the M&HCVs are the intracity or long-distance passenger carriers. LCVs are mainly used for smaller distances in the city or outside for tourism. The SCV segment is growing for transporting passengers travelling shorter distances. All these segments have a good potential to grow and, as India is a large country with a large population, it will continue to grow.
Currently, the price point and volumes in certain segments may not be enough for new players to enter. However, with future growth, existing as well as new players will benefit and have enough business opportunities.
What is your current market share?
In LCV passenger vehicles (3.5-5 tonnes segment), we currently maintain a 50 percent market share. We have just entered the LCV (5-7.5 T) passenger segment with our Traveller 26 and are targeting 20 percent market share in the next financial year. In the LCV goods segment, we have increased our market share by one percent this year to five percent.
Will the enforcement of the GST regime facilitate growth for the sector?
GST shall simplify taxes, reduce the multiplicity of taxes and also reduce the barriers. This, in turn, shall improve the productivity and facilitate business growth.
Which new models do you plan to introduce next year and in which segment do you foresee growth?
We have recently entered the LCV (passenger 5-7.5T) segment with our Traveller 26. With this expansion, we will add variants with features like different seating configurations, air conditioning, ABS and air suspension.
How have your exports done?
We are expanding internationally by providing country-specific modifications in Latin America, Middle East, South Asia and Africa.
Do you have plans for expansion?
Along with our group company, Jaya Hind Industries, our turnover has risen from Rs 1,314 crore in 2010-11 to Rs 2,085 in 2011-12. This year we expect our turnover to increase by about 20 percent. The company has plans to invest Rs 1000 crore in the next two to three years in product development and factory expansion.
SHOBHA MATHUR
The proposals were discussed recently at a meeting of the representatives of the National Manufacturing Competitiveness Council, the Union ministry of heavy industries, the ministry of trade and commerce, as well as SIAM members. Though the proposals were recommended for incorporation in the last Budget as well, they did not see the light of day. Hence, SIAM is optimistic that the prevailing slowdown and dip in sales and growth rates, particularly in the medium and heavy commercial vehicle (M&HCV) sector, this fiscal will prompt the government to take proactive measures to breathe life into the system.
Some of the recommendations include a fleet modernisation programme and suitable incentives for it like VAT that will necessarily spur new purchases by state transport undertakings (STUs) and private organisations after disposing off 15-year-old polluting trucks and buses.
In an austerity drive undertaken by the Centre some months ago, a circular from the finance ministry to all ministries has put a stop to all vehicle purchases, further jamming the spanner in the growth of the auto sector. Other demands of SIAM include rollback of excise duties to their pre-Budget level of 10 percent. The excise duties on CV chassis had been increased to 14 percent plus Rs 10,000 and on built-up CVs to 12 percent in the last Budget. Other proposals pertain to extension of the Jawaharlal Nehru National Renewal Mission (JnNURM) that offered the much-needed bailout to bus manufacturers in terms of purchase of new buses by STUs pan India during the last slowdown and is expected to trigger fresh purchases of CVs, says Vishnu Mathur, director general of SIAM.
The apex industry body is asking for funding and subsidies to be given to STUs to fund bus purchases as well as they have no funds for such big vehicle buys. Under the last JnNURM, STUs had bought around 10,000 city buses. SIAM has proposed that in the extension of JNNURM, inter-city buses should also be considered. A proposal of the ministry of road transport and highways in 2009 had suggested a similar scheme for long-distance buses, but the proposal faded into oblivion as the scheme was not pursued.
Another industry dampener has been the November 2012 SIAM results. The overall CV industry grew only 2.73 percent between April-November 2012 compared to the same period last year. While M&HCV sales fell by 6.34 percent, the LCV segment grew 16.98 percent. In November 2012, M&HCV sales fell 33.22 percent compared to November 2011. Exports also fell by 1.37 percent in April-November 2012 while in November alone, the drop was 21.50 percent. The CV industry grew at a CAGR of 11.59 percent in the last five years.
It is not difficult to pinpoint the reasons for this lacklustre performance. The slowdown of industrial growth and GDP, increasing inflation, trade and fiscal deficits of the government due to which it has mopped up all additional liquidity in the system impacting the economy, volatility of the rupee versus the US dollar that has stalled the inflow of foreign funds into the country are all contributory factors to negative market sentiments. To some extent, the increase in diesel prices has also affected consumer demand while the rise in freight rates has forced transporters to defer new vehicle purchases.
Stimulus package for M&HCVs called for
In view of the sluggish market, all new infrastructure projects and construction activities have been temporarily put on the backburner. Similarly, mining that was an important means of livelihood for the sector is still in complete disarray. There is a stalemate following the coal bloc scam. Land and environmental clearances still await the Centre’s approval as the government has not been able to pass the land acquisition bill in Parliament.
 |
According to Vinod Agarwal, CEO, VE Commercial Vehicles, if the bill is not put in fast- forward mode, coal cannot be extracted from the mines. People living on those lands have to be moved for which the Land Acquisition Bill and land reforms are required.
Similarly, the fall in investments in infrastructure, ports, airports and road construction results in lesser movement of cement and steel and fewer trucks for construction activities. Therefore, the captains of industry are clear that the need of the hour is that government announce a major stimulus package for M&HCVs that involves new infrastructure projects in the form of new road and highway projects as well as open up mines to create demand and get truck movement back on track.
Small is big
While the M&HCV industry was largely impacted by macro-economic factors, the light commercial vehicle (LCV) segment, especially small CVs (SCVs), has had a story of its own. Being a generator of jobs, LCVs are not dependent on overall industry growth. This, together with perceived growth potential in terms of the sheer size of the employable population in India, is contributing to its continued growth.
 |
A strong hub-and-spoke model, opportunities arising from restrictions on movements of heavy trucks in the major metros, the increasing focus of businesses on last-mile connectivity coupled with healthy demand from rural markets are some of the drivers behind LCV sales.
“A significant development is the emergence of young rural entrepreneurs – ‘sons of the soil’ who have displayed their acumen for establishing and running their own businesses. It is this group that sees LCVs as a sound value proposition that will enable them grow their business. Going forward, while the LCV segment will further continue to show positive growth, the M&HCV industry will look for signs of recovery in economic activity to get out of the negative zone,” says Pravin Shah, chief executive, automotive division, Mahindra & Mahindra. While the short-term outlook looks difficult for M&HCVs, Tata Motors is optimistic that government will introduce measures that will stimulate reform and revive growth.
So are CV manufacturers taking any special marketing initiatives to boost sales in the interregnum? Tata Motors, for instance, recently launched a new corporate campaign with the message, ‘Ek Kadam Aagey’ an indication of its resolve to stay ahead of the curve, and a step ahead of customer expectations. The campaign showcases Tata Motors’ range of existing and ready-to-be-launched CVs. A renewed emphasis has also been placed on the company’s aftersales service, Ravi Pisharody, executive director - commercial vehicles told Autocar Professional.
The company recently announced plans to roll out 25 offerings in the CV segment over a year of which six form part of the Tata Ace family. A new variant based on the Ace platform is slated to debut in January. The Ace recently clocked sales of a million units seven-and-a-half years after its launch and the target for crossing the next million is a shorter timeframe.
Force Motors, on the other hand, will be focusing on expansion of its network to improve customer service as well as the quality of processes and systems to improve the overall customer experience at dealerships, besides the regular marketing reach and initiatives. “We are expanding our product portfolio to capture new customer segments and to provide an extended association for existing customers whose needs may have changed," says Naresh Rattan, COO and president (corporate sales and marketing).
Force Motors recently launched its new 26-seater Traveller minibus that was originally designed by Mercedes-Benz and adapted by Force. It can be used for several applications including pick and drop, hospitality, medical services and tourism. The company plans to strengthen its current market share in the midsize segment from 50 percent. Competitors include Tata Motors and Eicher Motors with over 37 percent and 13 percent share respectively. Another key player in the LCV segment with its Maxximo and Genio LCVs is Mahindra & Mahindra that is driving sales through finance and exchange campaigns. Its focus is on value-added services like maintenance packages, mobile service support and referral programmes. Besides, the network of Mahindra Finance and Mahindra Farm Division is being leveraged for the sale of its SCVs and sub-one-tonne products through their outlets. “Going forward, we will ride on a low-cost technology in our quest to provide a unique purchase experience to an LCV customer through mobile phones and low-cost tablets,” adds Shah. In the LCV (goods carrier) segment, M&M holds a market share of 30.57percent (April-November 2012).
For Ashok Leyland Ltd (ALL), another big CV player, the coming few months will be very critical as it has a slew of new product launches planned as it strengthens its brand and network building across the country, as well as forays into new markets worldwide. A couple of months ago, it celebrated the first anniversary of the Dost, its LCV jointly produced with Nissan.
 |
To commemorate the event, ALL launched a limited edition Dost in Tamil Nadu, Karnataka, Kerala, Andhra Pradesh, Maharashtra, Gujarat, Rajasthan and Goa. The Dost is the leader with a 31 percent share in its category in these markets. Since its launch in September 2011, ALL has sold 21,829 Dosts till November 2012.
Notwithstanding the downturn, ALL also introduced a range of haulage trucks fitted with twin-speed rear axles (that can increase fuel efficiency up to 10 percent) last month at Namakkal. Deployed on 25- and 31-tonne trucks in both 6x2 and 8x2 configurations, the new set of technologies have been customised for ALL’s driveline with the twin-speed axle being the primary change.
While the market is still to look up, CV makers are also investing in upgrading skills including driver training programmes. India ranks among the highest in the world for road fatalities at 120,000 per annum. There is also a huge shortage of trained drivers. The National Skill Development Corporation (NSDC) has estimated a demand for over 50 lakh drivers, over a period of 10 years. The CV customer has also been evolving with higher expectations from the OEMs. Hence, CV makers are doing all to keep him satisfied.
In this respect, M&M conducts the ‘Do it Yourself’ training programme to train owners on the basics of routine vehicle maintenance. It also conducts driver training camps to provide customers basic technical know-how. Tata Motors, through a special professional driver training initiative called Kaushalya, has a two-pronged strategy: address road safety and for provide employment opportunities to the youth.
The company has invested in the Punjab State Institute of Automotive and Driving Skills (SIADS) at Mahuana to provide support in the form of designing course content, technical assistance and know-how, guidance, vehicles, training aggregates and teaching aids. The objective is to provide training to the youth of Punjab and, in turn, make them more employable. It also launched a CV Driving Centre in Jabalpur in August 2011 to impart training in driving both LCVs and HCVs. Through this initiative, Tata Motors hopes to train over 3.4 million youth by 2021 and thereafter, a million every year through 1,600 driver training centres.
While there are no plans in the pipeline for any special training schools for Force Motors, it is a possibility that may be explored in the future.
In Europe, professional driver training has been part of every OEM's portfolio for years and even companies such as Shell offer fuel-saving programmes. Realising this, ALL established a driver training institute at Namakkal which follows a comprehensive training course based on the syllabus specified by the Central Motor Vehicles Rules. Apart from lessons in driving theory, traffic education and vehicle maintenance, trainees are also schooled in public relations and soft skills and must take an additional course in first aid.
The CMVR requires that actual driving hours be not less than 15 hours, and trainees at Ashok Leyland Namakkal are given 55 hours of steering practice. An important aspect of the training emphasises fuel-saving techniques.
Eicher in turn has been honing driving skills through the Eicher Driver Training School at Pithampur which covers safety and fuel conservation aspects. Driver training programmes are also conducted at all its dealerships. A special driver’s manual has also been designed in Hindi and other regional languages. The training programme encompasses classrooms as well as practical lessons, according to A Nandakumar, head of customer service, VECV.
So it is clear that while the economic slowdown continues, CV manufacturers are not sitting idle. They are busy investing time and energy in upskilling workers and planning new products for the new year that opens a fortnight from now.
INTERVIEW WITH RAVI PISHARODY, EXECUTIVE DIRECTOR — CVs, TATA MOTORS
 |
Which are the new models that Tata Motors plans to introduce in 2013 and in which segment do you see growth over the next three years?
There are several models and variants planned for launch by Tata Motors across CV segments. These launches are slated to take place over the next two quarters and will include variants and upgrades from the Ace family, the all-new Ultra and Prima range as well. Growth in the LCV segment will continue over the medium-term. However, growth of the M&HCV segment is related to an overall economic recovery, which is hard to predict, and we are thus cautious.
How has the CV segment grown for Tata Motors since 2010 and what have been the challenges?
Over the last couple of years, we have grown our market share and offerings in the CV space. Vehicles such as the Prima, Xenon 3118, and Magic Iris have fulfilled crucial need gaps in the Indian transportation and the logistics scenario by bringing in the much-needed technologies to India. Over the last couple of years, we have introduced many variants of the Ace, two of which are the half-tonner Ace Zip and Magic Iris.
What is your current market share?
M & HCV segment for Q2 FY12-13
Buses & Trucks - 59.8%
Trucks - 67.1%
Buses - 42.6%
Buses for Q2 FY 13
Medium & heavy - 42.6%
Light & small - 51.0%
SCVs, LCVs, ICVs, Pick-ups for Q2 FY 13
SCV - 78.5%
LCVs - 79.9%
ICVs - 48%
Pick-up - 20.5%
How is Tata’s exports performance and which new markets are you planning to tap?
We plan to continue our focus on and sustain our presence in the markets we are already present in, though plans are to enhance our presence in emerging markets, with a focus on ASEAN, Asia, Africa, Middle East and Latin America, on the back of a new range of products like the Xenon, Super Ace, Prima and the Ultra range of trucks.
We are currently evaluating the feasibility of setting up manufacturing locations to cater to select geographies outside India, with a view towards bolstering our international presence.
INTERVIEW WITH PRAVIN SHAH, CHIEF EXECUTIVE, AUTOMOTIVE DIVISION, M&M
 |
How do you perceive the major challenges in the CV sector today?
Besides macro-economic factors, regulatory bottlenecks pose a significant challenge to the CV industry. Inconsistencies with respect to aged vehicle replacement and issuance of fitness certificates are creating headwinds. Moreover, fragmented regulations in key states with respect to registration of vehicles, tax structure, amongst others, have also affected demand. A robust regulatory framework, increased public spending on infrastructure (especially road transport) and introduction of game-changing fiscal measures such as GST can pave the way for a more conducive operating environment for manufacturers and customers alike.
Recently, the GM-SAIC-Wuling partnership put plans on hold for LCVs and Volkswagen has said it has currently no plans to introduce LCVs in India. However, Tata reached a milestone in Ace sales recently. So what does this portend in terms of new players mulling entry to India?
Overall LCV volume and growth figures suggest that this industry is growing in size and scale that makes it attractive for new players that wish to enter. Having said that, every new entrant will have to go through the learning curve of establishing wide sales and service reach and develop products with sound operating economics, over a period of time.
Current incumbents with credible brand equity, proven products and significant coverage with a deep understanding of local nuances will continue to hold an edge in this scenario. It is also important to recognise the peculiar mindset of a typical customer in this space.
People in this segment will not experiment too much and will purchase only proven products that offer a good value proposition. They look at operating economics, re-sale value and widespread sales and service footprint along with the availability of spares, while deciding on their purchase.
How has the CV segment grown for Mahindra & Mahindra in the last three years and what have been the challenges?
The last three years have seen the successful launches of Bolero Maxi Truck, Genio, Maxximo and Gio. During this period, we have grown at a CAGR of above 30 percent in this segment. Each new product was developed and launched with structured insights and keen understanding of customer needs. Like, in the case of any new commercial vehicle, the challenge was to build and now sustain brands which offer a solid value proposition to the customer and make sound business sense. This is a segment where word of mouth and referrals play a pivotal role. To this effect, the past few years have seen us expand our sales and service footprint at a rapid pace with the end objective of developing a condusive eco-system for our prospects and customers.
INTERVIEW WITH NARESH RATTAN, COO & PRESIDENT (CSM), FORCE MOTORS
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How do you view the entry of new players in the LCV space?
The Indian CV market (for 2011-2012) is divided with SCVs at 42 percent, LCVs with 12 percent, and M&HCVs with a 46 percent share. Broadly in goods, M &HCVs cover the mail routes that are hub-to-hub while the LCVs cover the hub to spoke. The new growing category, SCV, covers spoke to retail that covers the last mile or the narrow lanes. In the passenger category, the M&HCVs are the intracity or long-distance passenger carriers. LCVs are mainly used for smaller distances in the city or outside for tourism. The SCV segment is growing for transporting passengers travelling shorter distances. All these segments have a good potential to grow and, as India is a large country with a large population, it will continue to grow.
Currently, the price point and volumes in certain segments may not be enough for new players to enter. However, with future growth, existing as well as new players will benefit and have enough business opportunities.
What is your current market share?
In LCV passenger vehicles (3.5-5 tonnes segment), we currently maintain a 50 percent market share. We have just entered the LCV (5-7.5 T) passenger segment with our Traveller 26 and are targeting 20 percent market share in the next financial year. In the LCV goods segment, we have increased our market share by one percent this year to five percent.
Will the enforcement of the GST regime facilitate growth for the sector?
GST shall simplify taxes, reduce the multiplicity of taxes and also reduce the barriers. This, in turn, shall improve the productivity and facilitate business growth.
Which new models do you plan to introduce next year and in which segment do you foresee growth?
We have recently entered the LCV (passenger 5-7.5T) segment with our Traveller 26. With this expansion, we will add variants with features like different seating configurations, air conditioning, ABS and air suspension.
How have your exports done?
We are expanding internationally by providing country-specific modifications in Latin America, Middle East, South Asia and Africa.
Do you have plans for expansion?
Along with our group company, Jaya Hind Industries, our turnover has risen from Rs 1,314 crore in 2010-11 to Rs 2,085 in 2011-12. This year we expect our turnover to increase by about 20 percent. The company has plans to invest Rs 1000 crore in the next two to three years in product development and factory expansion.
SHOBHA MATHUR
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