After the small car assault on Indian roads now the global commercial vehicle makers are lining up to share the CV market segment that is growing at around 20% Year on Year except for 2008-009. Recent past market movements and consolidations are also getting cleared to determine the way Indian CV market is going to be shaping up.
Indian automotive industry, especially the CV segment has come a long way since 1950’s to become the 4th largest market in the world now with over 400,000 unit sales. The growth potential of Indian market is well accepted to attract investment from the global majors not just in installed capacities but in local R&D, New product design/development initiatives for Indian as well as export markets.
Market Scenario
Till pre-1980s while the Indian market was a closed market with poor Indian roads, infrastructure and demand for low cost vehicles witnessed sluggish pace in the styling, engineering in engine, drives of the vehicles. Poor road conditions contributed to the increased cost of ownership due to heavy maintenance. There was less scope for innovation hence the growth in variants of the vehicles was severely restricted.
The year 1991 saw the opening up of Indian markets for foreign investment and focussed investment in infrastructure development. The collaboration with global auto makers in terms of investments and technology started taking place. TATA had a collaboration with Daimler AG dating back to 1954 to assemble and sell the Mercedes Benz range of LCV in India. Until February 2010 Daimler AG had 5.4% stake in TATA motors that it decided to offload to pursue its own interest in India.
The development of Golden Quadrilateral Highway program that stretches across the India and revamped existing national highways in to multi and one-way lanes probably is one of the defining phases of Indian road transport and made headway for the CV industry. Presently India has over 57,000 km of National highway including stretches of express ways. A distance of around 400 km once took over 15 hrs was now possible to cover at half the time depending upon what time of the day the travel is made.
With better highway infrastructure providing better bearing capacity is leading to an increased demand for Multi Axle Vehicles. MAVs also offer better cost per tonne by reducing number of trips, fuel consumption and congestion. The same time Indian retail and logistics industries were fast turning in to organized sectors. The logistics model turned in to HUB and spoke model for distribution thereby giving a big boost for the LCV segment further to take the inroads. Government and local city corporations are working on policies further to restrict LCV within city limits that would trigger a demand of sub ton segment.
In passenger vehicle segment, the market is made up of small tourist operators for long distance travels usually over night and state run transport corporations. However the state transport corporations are loss making with inefficient operations, using old fleet of buses that breakdown more than they run and consume a lot of fuel. This gave rise to a new market for private operators that entered with new fleet and better operations. The light passenger vehicles are gaining market share by running on secondary roads, state highways connecting smaller cities. In urban market the school, office shuttles, ambulances etc., create a great prospect in next 5 years.
With rapid population growth in metros, the local municipal corporations have started looking in to rapid transit systems. The Volvo, Mercedes buses got great reception for long distance travel with large deals from not only the private travel companies like Raj travels but also the state road transport companies.
Further to this Indian Government came up with Automotive mission plan (from 2006 to 2016) to promote and grow the Automotive sector with a mission of making Auto Sector to contribute 10% to the Indian GDP this is around 6% presently, that would translate the turnover of over $150 billion and having created jobs to over 25 million people by 2016 in Auto eco-system. To aid to this Government has invested for world class infrastructure for localised R&D, testing, certification and validations at; Manesar, Chennai, ARAI (automotive research association of India) and VRDE (vehicle research and development establishment) at Ahmednagar. World class testing track at Pithampur
Market segment
In 2009 CV market saw sales of 384,000 units of which 45% were LCV. The export segment saw over 42,000 units mainly to Middle East and African countries.
The Commercial vehicles are classified based on Gross Vehicle weight which the weight of the vehicle and the maximum weight the vehicle are allowed to carry. GVW of over 16 tonnes the vehicles are classified as HCV, 7.5 to 16 tonnes as MCV and less that 7.5 tonnes are LCV.
Market players
The Indian majors control majority of the market share with TATA motors enjoying major share of that in both cargo and passenger vehicle with a share of 64%. TATA, Ashok Leyland and Mahindra & Mahindra together control over 84% share. Over last 5 years, the CV market has seen global majors entering India eyeing to taste this huge potential. A lot of consolidations, JVs have taken place to position them in India, ASEAN market.
Opportunities:
1) Global markets getting stagnant, while China, India and Thiland driving double digit growth
2) Indian GDP targeted at 8-9.5% growth in coming years leading to the need for massive infrastructure movement
3) India does not have a clearly defined scrap policy for old vehicles. So far the small operators have been pushing the old vehicles on road to maintain their bottom-line. However this fleet needs to be replaced with better technology vehicles with better load capacity and less maintenance
4) India Retail, logistic, distribution sectors getting organized creating opportunity for CV market to split in to further more segments
Challenges
Picture courtesy - TATA, Mahindra navistar, swaraz mazda, Volvo india.
Market Scenario
Till pre-1980s while the Indian market was a closed market with poor Indian roads, infrastructure and demand for low cost vehicles witnessed sluggish pace in the styling, engineering in engine, drives of the vehicles. Poor road conditions contributed to the increased cost of ownership due to heavy maintenance. There was less scope for innovation hence the growth in variants of the vehicles was severely restricted. 
The development of Golden Quadrilateral Highway program that stretches across the India and revamped existing national highways in to multi and one-way lanes probably is one of the defining phases of Indian road transport and made headway for the CV industry. Presently India has over 57,000 km of National highway including stretches of express ways. A distance of around 400 km once took over 15 hrs was now possible to cover at half the time depending upon what time of the day the travel is made. 
With better highway infrastructure providing better bearing capacity is leading to an increased demand for Multi Axle Vehicles. MAVs also offer better cost per tonne by reducing number of trips, fuel consumption and congestion. The same time Indian retail and logistics industries were fast turning in to organized sectors. The logistics model turned in to HUB and spoke model for distribution thereby giving a big boost for the LCV segment further to take the inroads. Government and local city corporations are working on policies further to restrict LCV within city limits that would trigger a demand of sub ton segment. 
In passenger vehicle segment, the market is made up of small tourist operators for long distance travels usually over night and state run transport corporations. However the state transport corporations are loss making with inefficient operations, using old fleet of buses that breakdown more than they run and consume a lot of fuel. This gave rise to a new market for private operators that entered with new fleet and better operations. The light passenger vehicles are gaining market share by running on secondary roads, state highways connecting smaller cities. In urban market the school, office shuttles, ambulances etc., create a great prospect in next 5 years. 
Market segment
In 2009 CV market saw sales of 384,000 units of which 45% were LCV. The export segment saw over 42,000 units mainly to Middle East and African countries.
Vehicle type
|
%
|
M&HCV
|
39%
|
LCV
|
45%
|
M&HC passenger vehicles
|
9%
|
LC Passenger vehicle
|
7%
|
The Commercial vehicles are classified based on Gross Vehicle weight which the weight of the vehicle and the maximum weight the vehicle are allowed to carry. GVW of over 16 tonnes the vehicles are classified as HCV, 7.5 to 16 tonnes as MCV and less that 7.5 tonnes are LCV.
Market players
TATA motors
|
|
Ashok Leyland
Nissan
|
|
Mahindra & Mahindra
Navistar Inc.,
|
|
Eicher Motors
AB Volvo
|
|
Swaraz
Mazda
|
|
Force Motors
MAN AG
|
|
Daimler AG
|
|
AB Scania
|
|
Iveco SPA
(CV unit of Fiat)
|
|
Paccar Inc
|
|
Opportunities:
1) Global markets getting stagnant, while China, India and Thiland driving double digit growth
2) Indian GDP targeted at 8-9.5% growth in coming years leading to the need for massive infrastructure movement
3) India does not have a clearly defined scrap policy for old vehicles. So far the small operators have been pushing the old vehicles on road to maintain their bottom-line. However this fleet needs to be replaced with better technology vehicles with better load capacity and less maintenance
4) India Retail, logistic, distribution sectors getting organized creating opportunity for CV market to split in to further more segments
5) Easy financial options. Most of the vehicle makers now have a strategic relationship with bankers and also their own financial units for easy credit.
6) More specialized vehicles required for perishable, oil, mining sectors
Challenges
1) Excise, interest rate, fuel price, raw material price hikes
2) Trained drivers for sophisticated vehicles and planned maintenance
3) Increased competition and expansion in capacity would pressure on margins leading to just a volume driven model
The commercial vehicle market is purely an economic pay and has moved cyclically, however India now established itself as a global manufacturing hub for sourcing and now proving a high growth market also makes it surely a long term story for CV makers.
Picture courtesy - TATA, Mahindra navistar, swaraz mazda, Volvo india.
