These companies have set their eyes on primarily Asean countries like Indonesia, Thailand and Myanmar, Middle East, Africa, Ukaraine, Russia and Latin America. International growth in bus segment is faster than trucks because buses move on limited radius, transporting passengers in a local area, said Vinod Dasari, the managing director of Ashok Leyland.
As of now, Ashok Leyland assembles buses in Ras-al-Khaimah in UAE and Sri Lanka, and Indias largest bus maker Tata Motors assembles its buses in Spain and Brazil. Both make buses anywhere between 16 and 66 seaters to suit local demand.
Tata Motors, meanwhile, said it prefers setting up assembly units abroad to exporting completely built units. We hope to maintain 25-30% growth in exports, says PM Telang, the managing director of India operations. We are looking at assembly operations in a number of markets as against shipping fully-built vehicles.
The company, which recently started assembling trucks in South Africa, said will announce a new location for its assembly line for trucks and buses in next three to four months. It is looking to expand its Myanmar assembly plant for large commercial vehicles to assemble buses and probably smaller commercial vehicles, Telang said.
Tata Motors and Ashok Leyland have been in Africa and Middle East markets for a while and have some understanding of these markets, said VG Ramakrishnan, senior director, transportation and logistics South Asia, Middle East and North Africa at consulting firm Frost & Sullivan. Among the large markets for buses, Africa tops the list and also the market of focus. Moreover, a large number of sales take place on bilateral agreements with the Indian government.
CV makers are targeting populous markets for export of buses as the governance issues in these regions get resolved, said Abdul Majeed, auto practice leader, PricewaterhouseCoopers India. He said markets like Latin America and Africa could be anywhere around 10,000-15,000 buses at the moment and have great potential to grow.
Brazil, Mexico and Argentina are seen as big markets in Latin America, while North Africa holds big potentials in the African region.
According to the official websites of the Brazilian automobile industry, the Brazil bus market in last calendar stood at 34.672 units, including locally manufactured and imported. Argentinas reported a sale of 5,546 units of buses (under passenger transport segment) on its automobile industry website for the last year.South Africa sold buses over 8,500 kg of around 971 units last calendar year.
Ashok Leyland has chosen to partner with local companies and will stay away from outright acquisitions. The company would follow a partnership model than outright acquisitions, Dasari said. We are not going to go out and acquire companies, he said. Instead, we have identified a few markets, and will approach them through partners, as per the specific requirements and certifications for those markets, he added.
The company hiked its stake in the British bus maker Optare to 75.1% from 26%, a move seen to bolster its export plans. Optare, pioneers of low-floor double deckers in Britain, is known for its low-floor midi and city buses.
The company has a strong presence in Sri Lanka, Bangladesh and Mauritius, and sees growth in non-traditional markets. We are strong in Saarc region with almost 90% market share, says Dasari. We are growing at 50% in the non-traditional export markets.
Exports make around 10% of the total sales for Ashok Leyland and Tata Motors, said Amit Kasat, an analyst with Standard Chartered Research in Mumbai. Buses are a small part of it but have huge potential. Small base and huge growth is easy.
These companies are looking at expanding presence and availing the benefits available in local market, he said. Ashok Leyland exported 1,000 commercial vehicles in financial year 2010-11, of which 600 were buses. In first two quarters of current financial year, both the companies posted 30% growth in exports, which they expect to maintain in 2012-13.
According to a Mumbai-based analyst, the demand for buses worldwide is expected to grow by 4% per year. This, he said, will be on the back of turnaround in demand in North America and sustained sales in many other markets.
In 2011-12, bus market in India slowed as the Union government aid to states for bus purchase ended and customers made advance purchases in 2010-11 on the anticipated new emission norms. Sales fell 10.4% in eight months between April and November, compared with the same period last year, after an 18% growth in past two years.