AMW pins hopes on new growth highway

The first and only CV manufacturer so far in Gujarat expects the new government to clear fiscal hurdles on India’s highways. It is also building its presence overseas to counter domestic cyclicality, says Sumantra B Barooah.

AMW Motors' president A Ramasubra-manian, a 40-year industry veteran, says he has not seen a period worse than the current downturn. With a new government at the Centre headed by a man who has promised development and popularised the phrase ‘achche din aane wale hain’ (good days will be here), Ramasubramanian hopes that will hold good for the truck industry as well. There have been some positive feelers in the form of unlocking value in Coal India, the world’s largest coal mining company.

Unlocking value in the coal industry could lead to a next IT-like story in India, says Ramasubramanian. He has a special interest in the coal industry because of its direct link to AMW’s business. Of the over 35,000 trucks it has sold so far, almost all are for off-highway applications like mining and construction. “For Modi, it will take a stroke of the pen and, maybe three months later, the economy will be different,” says Ramasubramanian. “An industry whose numbers are stagnating at around 250,000 is not a great sign,” he says.

MOOTING A SIMPLER TAX STRUCTURE 

While pinning hopes on the new government’s policies, AMW is looking forward to a simpler tax structure to facilitate increased goods movements. Rationalisation of taxes and the implementation of the long-awaited Goods and Services Tax (GST) will play key roles.

Stressing the need to simplify the tax regime, Ramasubramanian says, “Manufacturing goods, food grains, processed food, vegetables, poultry – all these lie as inventory on wheels for anywhere between 3-15 days. A reasonable portion of the GDP is on the road as inventory. Imagine this being reduced by half or one-third?"

Ramasubramanian is now working on a strategy for AMW to make inroads in the haulage truck segment. The company is still in the ‘pilot stage’ in the haulage segment with sales of only 1,000 units so far. AMW says fast services do not command a premium in the highway segment as it does in the off-highway segment where trucks are expected to run 24X7 with fast turnaround times.

That is because of the various fiscal hurdles that slow truck movement. Ramasubramanian says some fleet owners do not want to pay for better technology in trucks because of the bottlenecks on the highways. “Fleet owners say their total driving time will improve by 50 percent (with better technology), but 200 percent of time is lost in the check nakas,” he says.

Fleet operators will look to the new government to remove the fiscal obstacles from their trucks’ path. And as that happens, AMW hopes to have a better share of the highway space. The youngest player in India, Daimler India Commercial Vehicles has made good inroads into the highway segment and AMW would have to challenge it.

AMW, which got off to a good start in the off-highway segment with its 49- and 25-tonners wants to bring “the concept of high efficiency into the highway”.

AMW has lined up some new products for this year to enhance its presence in the highway segment and grow further in the off-highway market. The seven-year-old company still doesn’t qualify as a ‘full-fledged’ commercial vehicle player as it does not have a portfolio to address the entire market. It plans to use the downturn to expand to address the entire market. “We have now reached about 90 percent. It is not only the haulage trucks, but even the lower end construction and quarry equipment,” says Ramasubramanian.

Exports and local cyclicality

Given the CV segment’s cyclical nature, AMW adopted an exports strategy a year and a half ago and is in the process of implementing it. It has started work on nine countries so far and plans to add another 3-4 markets by December. Of the nine, some are in the pilot stage. Currently, the company is in the process of sending its first batch of trucks to Oman. Target regions include the Middle East, South Asia and Africa in the first phase. They will be followed by the Far East and Africa. “This is to ensure that as we go higher in volume, we have a natural hedge in the form of different cycles,” says Ramasubramanian. So far, AMW Motors has exported 300-400 trucks.

So all eyes are on what the just-sworn-in government will do to help the CV segment in India. Some in the industry are looking for a growth of around 15 percent this year. “We believe that 120,000 units will increase to 138,000 units. This will be optimistic if the situation is similar to last year's. It can be very pessimistic if Modi delivers,” signs off Ramasubramanian.