CV makers to invest more in new launches, variants

Commercial vehicle (CV) makers are looking to invest more in new variants and launches to fight competition and address new demand in 2012-13 on easing interest rates, even as they witnessed a slowdown in sales in fiscal 2012.

Tata Motors, India?s largest CV maker, for instance, is planning to invest anywhere between R1,500 crore and R2,000 crore for new products across its CV range.

The company plans to launch 50 new products ranging from light CVs to multi-axle variants of its medium and heavy duty trucks during the 2013 fiscal. ?We will invest R1,500 crore to R2,000 crore for our new line of products,? said Ravi Pisharody, president (commercial vehicle business unit) at Tata Motors, on Friday at the sidelines of the second SIAM HR Conclave.

Competition for Tata Motors is emerging in the medium and heavy truck segment from German-major Daimler?s BharatBenz range of trucks. Mahindra Navistar, which already has 3.6% market share after nearly two years of operations, is also ramping up capacity to capture a greater share of the pie.

BharatBenz is launching 20 models by the middle of calendar year 2013. The German company has spent R4,400 crore to set up its manufacturing facility in Orgadam near Chennai. The facility also includes an exclusive test track and has a capacity of 36,000 units per month, which will be ramped up to 72,000 units per month.

The increased localisation of trucks will give it cost competitiveness against market leader Tata Motors? which holds 59.4% market share in the 3.4 lakh unit a year Indian truck and light commercial vehicle market.

?It took us three to four years to build these trucks with 85-90% localisation for the low cost,? said Marc Llistosella, chief executive officer and managing director of Daimler India Commercial Vehicles, at the launch of the BharatBenz lineup of trucks on March 3.

Mahindra Navistar has also lined up six-seven new launches for the fiscal as it aims to get a stronger foothold in the truck market. It produced its 5,000th truck from its Chakan plant in May and is in the middle of a R250-crore investment programme to ramp up production in the next twelve months.

?Our volumes are very small at present; so we expect to beat the industry growth in the MHCV segment during this fiscal,? said Pawan Goenka, president of the automotive and farm equipment division of Mahindra & Mahindra, after announcing the fiscal 2012 results on May 31. ?As we ramp up our capacity in the next 12 months, we expect to see a sizeable increase in volumes.? Goenka did not share the company?s target for sales growth.

Hinduja group-owned Ashok Leyland, which depends on the MHCV segment for more than 70% of its annual revenues is increasing its sales and service network along with increasing loan disbursements from its financing division to remain competitive in the market.

Intense competition is emerging in the medium and heavy truck segment even as sales growth for the fiscal 2012 slowed down to 5% in fiscal 2012.

?The market for medium and heavy trucks is very tough right now and we are operating at 70% capacity at the moment,? said Pisharody.

Analysts expect medium and heavy truck sales to be slow in 2013, but better than the previous fiscal. ?Domestic MHCV sales volume growth is likely to recover to 10% by 2013 fiscal on account of a pick up in investment activity and freight availability due to the likely reversal in the interest rate cycle,? said Avendus India Equity research in a note released on February 23. ?In addition, higher loan disbursements and touch points are also likely to aid sales volume growth.?

Industry research body, Indian Foundation of Transport Research and Training (IFTRT) paints an even gloomier picture. ?Truck sales do not seem to be returning to positive territory in the near future,? IFTRT said after the May 2012 sales numbers were released on June 2. ?It may be reiterated that a very large number of fleet operators are putting off their plans of expansion and first time users (FTUs) are getting scared of owning new trucks because of the 20% increase in truck tonnage capacity during last fiscal ending March 2012 and sudden drop in cargo availability in April & May.?

However, dealers say that the slowdown in truck sales is only in the tier-I cities and there is still growth in rural India. ?In places like Bihar, truck sales are still robust,? said a Tata Motors? dealership owner with dealerships in Bihar. ?The only thing that has changed is that truck owners are looking for trucks which have low cost of ownership.?

Within the medium and heavy trucks segment, multi-axle variants, which are larger, have been growing faster than the industry. Sales of multi-axle variants grew by 9.6% in the 2012 fiscal, according to IFTRT. The 2013 fiscal has started off badly and even multi-axle variants have witnessed a sales drop along with an overall fall in truck sales.