Bus manufacturers are banking on a new rule that allows easier inter-state travel permissions to boost demand for buses.
In an interaction with Autocar Professional, Akash Passey, President (Bus Division), Volvo Eicher Commercial Vehicles (VECV) said that with schools normally closing around April-May months each year for the summer vacations, he expects tourism in the country to pick up. He also says that this depends on there being no further pandemic wave.
It is, however, the regulatory changes in taxation for inter-state tourist buses which may lower the costs of a bus for operators and lead to lower fares that he says may help the sector get a much-needed boost.
As per industry rules, the taxes on inter-state buses are determined by the number of seats or berths in the vehicles. A back-of-the envelope calculation may help understand the tax structure for the tourist bus operators vis-a-vis the older one. For instance, when an inter-state bus earlier travelled between Mumbai to Bengaluru covering around 600 kilometers and passing through Maharashtra and Karnataka, both the states levied approximately Rs 28,000 and Rs 59,200 of taxes respectively. However, under the new all-India permit rules, the charges levied by Maharashtra remain the same at around Rs 28,000, but the remaining charges come down drastically to Rs 25,000, thereby cumulatively adding up to just about Rs 53,000 which is a clear saving of nearly Rs 35,000 as compared to the earlier structure.
As an example, if a bus travels from Bengaluru to Hyderabad covering over 700 km, thereby transitioning through Karnataka and Andhra Pradesh before reaching Telangana, the earlier levies that would be approximately total Rs 158,400 would be nearly halved which amounts to a big savings for bus operators especially in current times when pandemic has eaten into their businesses.
As Passey puts it, in earlier regime, changes in the travel routes by the operators was limited by the differential state-levied taxes. Also, if a bus passing through States A, B, and C was involved in an accident prompting the operator to decide to ply another bus, he couldn't do it as the taxes were paid in relation to that specific bus and not for its replacement. This is because it would entail services on the route until the procedure for getting back the earlier bus were sorted out. "By the time the operator sorted out the process of the accident, he would have wasted several day, and this downtime would hurt his business, “explains Passey. In the new structure, such anomalies have been ironed out.
Have roads, will travel
According to industry experts, demand for India's over $15 billion inter-city traveling has seen a steady uptick in recent years due to several reasons including regulatory reforms and expansion of better road facilities. About 13300 km of national road highway project was completed in FY2021 which has made travelling long distances more accessible.
Rohit Srivastava, Vice President, Product Line, Buses, Tata Motors said, " The push by the government for 13.5-metre two-axle buses has encouraged fleet owners to take up long route buses. From the first quarter of FY2023, the intercity bus volumes are expected to see an uptick. Also, the attempt to cut fossil fuels and adoption of alternate fuels like CNG and electric buses, and the trend for Public Private Partnership (PPP) for avoidance of upfront capex could help.”
Srivastava also says that though the financiers are cautious on funding first-time users, the funding support continues to be smoother for experienced fleet owners with a healthy track record of timely repayments. "Q3 of the current fiscal year saw improved demand, in the form of enquiries and contracts, and we expect volumes to increase by the end of Q4 FY22," he adds.
The country’s CV majors have already begun rolling out long distance sleeper luxury buses which their executives say will enable them to tap rising demand from the tourism market. In October last year, VECV launched an all-new coach and sleeper bus range which are designed and built at the company's factory in Hosakote, Karnataka, on the front engine Eicher 6016 R LPO 12.4m chassis. The fully air-conditioned coach seats 43 passengers and has 11.3 cu.m luggage space. The sleeper version offers 30 berths that maximise comfort and safety and offers 6.5 cu.m of luggage space. Berths are separated by full-height partitions to ensure privacy and security, the company adds.
According to company officials, Volvo and Eicher Motors, which are partners in the business, are betting on the synergies to address the untapped bus market in India. Earlier, Eicher products were priced below Rs 40 lakh while Volvo buses cost around Rs 1 crore. With the new products, the aim is to target the mid-premium segment, where the partners do not have any presence. Essentially, this is the ‘white space’ in the bus market. Though the current market size in the mid-premium range remains small at present, in good times, the addressable market size was around 20,000-25,000 units. Last November, Tata Motors threw its hat into the ring with the launch of a bus which the company executives say is the country’s first 13.5-meter-long bus for luxurious inter-city traveling.
Manoj Agarwala, Senior VP, redBus- a leading online bus ticketing platform provides some perspective for rising trend towards sleeper coaches, which he says has accelerated due to the better perception of health safety. For redBus , the contribution from sleeper coaches in inter-state bus travelling has increased to 55 percent in the past 18-20 months as compared to 45 percent earlier. The platform boasts of having around 3,000 private operators and 25 road transport corporations (STUs) on its platform. Agarwala explains that increasing numbers of travellers are now preferring to travel in sleepers for health reasons as it comes with compartments which is not the case with push-back seaters. " We were anticipating pickup in demand for new buses but due to Covid19, all plans of operators to buy new vehicles have been postponed. I am sure, the moment operators have visibility of 4-6 quarters of un restricted operations, the replacement cycles and new opportunities will see some demand for new vehicles increase, “said Agarwala.
Schools are back
According to bus manufacturers, post the second Covid wave, enquiries for school application started picking up from Q2 FY22, with some states opening up schools. However, the fleet owners in the segment deferred the purchases due to the third wave of the coronavirus, after November 2021. Now, with the cases plateauing and reducing in specific states like Maharashtra, schools are gradually beginning to open up, and other states are expected to follow up. " The re-opening of schools across India will help gain a positive sentiment amongst the fleet owners, resulting in an uptick in demand from the first quarter of FY2023. Pent-up demand and replacement demand for the old fleet is also expected to increase volumes in the next fiscal," noted Tata Motor's Srivastava.
Based on data available with OEMs, Ashok Leyland registered a cumulative wholesale of 2797 units in M&HCV segment buses during FY2022 (until January) as against 1296 units during corresponding period last- a growth of 116 percent, albeit on a lower base. VECV and Tata Motors do not offer separate data for truck and bus sales.