4-wheeler SCVs slowly eat into 3-wheeler sales

Small commercial vehicles (SCVs) are giving a hard time to three-wheelers, particularly goods carriers. As per the findings of an ICRA study, SCVs are increasingly gaining popularity even in the lower tonnage (0.5T) cargo segments with the introduction of smaller vehicles by CV OEMs.

While the domestic three-wheeler goods segment has de-grown at 9 percent CAGR over the last five years, SCVs have reported robust 21 percent CAGR growth over the same period. Moreover, slowing economic growth, moderating consumer goods consumption, high inflation, increase in financing costs, rising fuel prices, absence of fresh permits by the state governments and an overall high base have adversely impacted domestic three-wheeler sales in FY12.

According to Subrata Ray, senior group VP, ICRA Research, four-wheeled SCVs, particularly the Tata Ace, have altered the industry dynamics considerably since 2007. The high-tonnage 3W cargo segment (0.75T and above) has already made way for SCVs that provide higher stability, safety, speed, space and style.

Exports will be the key growth driver for three-wheelers. India saw domestic sales of around 513,000 units and exports of 363,000 units in 2011-12. India has also emerged as an important export hub for some South Asian, African and Latin American markets that are replicating the Indian three-wheeler story with rising disposable incomes but inadequate public transport systems.

ICRA Research expects the domestic three-wheeler passenger segment to benefit from product up-gradations (2-stroke to 4-stroke, petrol/diesel to CNG, front engine to rear-engined vehicles) as well as opening of fresh permits by various state governments. ICRA expects the three-wheeler industry to report a moderate volume CAGR of 7-8 percent over the next five years.