Chennai: A move by transporters towards the hub-and-spoke model, and a 2005 Supreme Court order banning trucks from carrying cargo heavier than designated payloads, has shrunk the market for mid-range trucks. This is also forcing truck makers to shuffle their portfolio to reflect changing market dynamics.
Heavy trucks make up the fastest-growing segment in the country, with sales increasing at nearly 70% in fiscal 2007 to 1.46 lakh units. The second- fastest segment is the sub-3.5 tonne category, comprising vehicle used to transport goods within cities.
The growth of these categories, however, is coming at the expense of mid-range trucks, which in the past were used to serve both needs. This category grew only 2.4% the last fiscal. Moreover, one out of three trucks sold in India’s 4.2 lakh units a year market is a heavy truck, the single largest segment. “Vehicle manufacturers are trying to diversify their offerings”, said Sachin Mathur, head of research at Crisil India. “The new launches have been in the sub-four tonne or in the 16 tonne category,” he added.
The most significant launch was Tata Motors Ltd’s Ace, which by some estimates is the single largest selling truck in India, with sales of more than 60,000 units per year.
Rival Ashok Leyland Ltd is working on products in this segment, even as it recently showcased its NEWGEN range of heavy commercial vehicles.
Other companies, however, are being forced to quickly look for options, including Swaraj Mazda Ltd and Eicher Motors Ltd, which derive more than 90% of their sales from the mid-range trucks.
“We want to have a presence in all segments, Siddhartha Lal, group CEO of Eicher, had said in a recent interview.
“There is a pressure on players on product development,” said Mathur. “In the case of light commercial vehicles, it is a product design challenge. However, in the case of heavy commercial vehicles, it is the transmission and engine technologies,” he added.
Many players such as Mahindra & Mahindra Ltd (M&M) and Force Motors Ltd are tying up with global truck makers to gain access to technology. While, Force Motors has tied up with a Germany-based commercial vehicle manufacturer, MAN Nutzfahrzeuge Group, M&M has struck an alliance with US-based International Truck & Engine Corp.
Currently international truck makers, including Tatra Vectra Motors Ltd, command only less than 1% market share in the medium and heavy commercial vehicle segment.
“MNC (multinational companies) players have not yet established a significant distribution network and also in India, the owner is not the driver, so a product providing driver comfort has not gained acceptance. However, with fuel efficiency being a prime concern, MNC players will make an impact,” said Mathur.