Big demand for 4-wheeled SCVs hits 3-wheeler cargo carrier sales

June 13, 2012: Small commercial vehicles (SCVs) are giving a hard time to three-wheelers. 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 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 growth driver for 3-wheelers

India is the world’s foremost producer, consumer and exporter of three-wheelers with domestic sales of around 513,000 units and exports of 363,000 units in 2011-12. Three-wheelers are widely used as an affordable means of short-to-medium distance public transportation and last-mile connectivity for goods transportation.

Apart from the domestic demand, India has also emerged as important export hub with presence in some of the South Asian, African and Latin American markets that are replicating the Indian three-wheeler story with rising disposable incomes but inadequate public transport systems. Overall, the three-wheeler industry has witnessed relatively healthy 15 percent CAGR volume growth over the last decade driven by moderate domestic growth (10 percent CAGR) and robust exports growth (38 percent CAGR).

Exports will remain the main growth driver for the three-wheeler industry due to rising disposable incomes, evolving travel and consumption patterns, improving road infrastructure, increasing demand for motorised transportation and inadequate public transport systems in the target emerging markets. 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. Despite stiff competition from four-wheeler SCVs, the domestic 3W goods segment continues to benefit from its favorable operating economics for first-time users.

ICRA expects the three-wheeler industry to report a moderate volume CAGR of 7-8 percent over the next five years. Long-term sales growth will be the highest in the exports segment, followed by the passenger carrier segment and the lowest in the goods carrier segment due to intense competition from four-wheeled SCVs.