GST implementation had its share of challenges as the economy and the CV industry went through the initial phase of adoption amidst various uncertainties.
Girish Wagh, head, commercial vehicles business unit, Tata Motors, in an interview with FE’s Deepak Kumar said that the after-affects of GST have slowly receded and the commercial vehicle (CV) segment is likely to continue growing at a fast pace in the coming fiscal. He also spoke about the ways in which the company plans to regain market share in the competitive heavy trucks space in the country. Excerpts:
Can we say that the pain of GST is behind us?
GST implementation had its share of challenges as the economy and the CV industry went through the initial phase of adoption amidst various uncertainties. However, since those early days of GST implementation, we have seen the economy has picked up strongly. The CV industry, which is closely linked to GDP growth rates, has seen a strong resurgence and a number of factors have contributed to the increased demand for CVs across various sectors — construction, cement, auto logistics, petroleum, e-commerce, steel and others. Transporters are also beginning to see the benefit of input tax credit on all purchases, as they are adopting reverse charge mechanism and therefore bringing down overall costs.
How has the boom in the e-commerce industry helped CV sales?
Investments in the e-commerce segment are driving demand for last-mile transportation requirements and in turn for small commercial vehicles. The growth in the e-commerce sector has resulted in Tata Motors’ SCV segment and pick-ups growing by 25% on a y-o-y basis.
What other growth drivers do you see for truck sales?
The M&HCV segment growth is aided by higher budgetary allocation towards infrastructure and rural sectors, potential implementation of vehicle scrappage programme and stricter implementation of regulatory norms, especially related to vehicle length (for certain applications), and overloading and other regulatory norms, resumption of mining activities in select states leading to increase in demand for tippers, a segment which has outperformed the industry during the current fiscal. We see the road construction segment booming due to the impetus provided in the budgetary allocations for roads and infrastructure projects. The road construction push includes the Bharatmala Pariyojana with a `5.35-trillion investment to construct 34,800 km of roads. In addition, `1.57 trillion will be spent on the construction of 48,877 km of roads by the state-run National Highways Authority of India and the ministry of road transport and highways. The requirement of tippers for this industry comes from primarily two applications, aggregate mining and surface transport. Both these applications will see unprecedented demand in the coming two years. In the mid-term, we expect a significant shift in the surface movement application of aggregates with several road projects receiving clearances. Also, there has been good demand on account of building of smart cities, SEZ projects and other infrastructure projects across the country.
With intense competition, what are you doing to gain market share?
At the heart of our business is our strong relationship with our customers, our channel and other key stakeholders. The company is continuing to take measures to enhance engagement with all stakeholders at various levels, including senior management, to ensure that we are close to the market and are better placed to serve the needs of our customers. We will continue to invest in products, network, and plan to further strengthen our channel with more set-ups across the country. Tata Motors is also looking at equipping more dealers to be able to offer mobile workshop services. At present, the company has 164 fully-loaded mobile workshops and 390 container workshops deployed at all major trucking and tipper centres. Also, at the Auto Expo 2018, Tata Motors showcased a whole new range of 15 new CV products.
The bus segment has taken a beating this year. What is the reason behind this?
In the last three quarters, unlike the cargo segment, the passenger segment has seen a decline in volumes. This is primarily due to two reasons — the buses are impacted by STU buying and this year has seen very subdued buying by most STUs across the country. Further, the smaller vehicles that are impacted by permits has seen a decline with very few fresh permits being issued. The demand in this segment is largely driven by school requirement and to an extent the staff and tourist segments. These segments are, however, very seasonal and hence we have seen a contraction in the Industry this year. The industry has declined by 6% to 96,717 units for the year so far. However, Tata Motors has declined by only 4% and this has given us a gain of 1% market share for the year.
What is your outlook for the CV industry in FY19?
The increased demand for vehicles across segments and production ramp-up of the new range of BS-IV vehicles has given a strong boost to overall sales growth. We estimate the growth to continue unhindered in the coming year. We are also positive about the government outlay on infrastructure and road development projects, which would lead to very good growth and sustained pipeline for the tipper segment.