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Business News/ Industry / Manufacturing/  Tata Motors plans to double export of commercial vehicles in two years
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Tata Motors plans to double export of commercial vehicles in two years

Tata Motors to consolidate presence in existing markets like Vietnam, make inroads in the Middle East, Africa and Latin America for exports

After expanding briskly for nearly two years, sales of medium and heavy-duty trucks are moderating as replacement demand—one of the key drivers of growth so far, has started to wear off. Photo: Ramesh Pathania/MintPremium
After expanding briskly for nearly two years, sales of medium and heavy-duty trucks are moderating as replacement demand—one of the key drivers of growth so far, has started to wear off.
Photo: Ramesh Pathania/Mint

Mumbai: Tata Motors Ltd is planning a big push in the export of commercial vehicles in a bid to cushion itself from the cyclical nature of the home market.

The market leader in trucks exported 50,000 units in the year ended in March 2016 and is now looking to double overseas sales in the next two years, Ravindra Pisharody, executive director of commercial vehicles said in an interview with Mint.

“Besides defence, exports is an important pillar to hedge ourselves from the cyclical swings in the domestic market," he said.

The plan, he added, will include a two-pronged strategy of consolidating presence in markets like Vietnam, which it entered three years ago, and focusing on newer ones like Tunisia in North Africa.

Tata Motors exported 54,029 units of commercial vehicles, including light commercial vehicles, in 2015-16, against 46,413 units in 2014-15. “We are looking to do 65,000 units this year and 100,000 in the next two years," said Pisharody. “Our target market is everywhere except Europe and North America."

Traditionally, Indian CV manufacturers have focused on neighbouring markets like Sri Lanka and Bangladesh, but lately, encouraged by the opportunity and a fluctuating home market, they are setting sights farther. The strategy for Tata Motors will include making deeper inroads into the Middle East, Africa and Latin America.

In order to hedge itself from currency fluctuations and economic uncertainty in Brazil, which was its lead market once, Tata Motors has expanded itself in “fringe markets" like Chile and Venezuela, Pisharody said. It added Bolivia three months ago to the list of such markets. “These are small markets but still promising," he said.

Eastern Europe is another focus market for the company, while the Association of Southeast Asian Nations (Asean) has been one of the big volume drivers.

Over the next two years, Tata Motors plans to have local presence in seven to eight markets. These will include existing ones in Thailand and Bangladesh.

“The plans to have a local presence in markets like Africa, the Middle East and Vietnam have been driven by local regulations and levy of duty tariffs," said Pisharody. He pointed out that it will include tying up with a local distributor to setting up a company-owned assembly facility.

Sudarshan Shrinivas, director, corporate, India Ratings and Research Ltd, said the strategy to push exports is a function of the cyclical swings particularly in medium and heavy commercial vehicle segment, seen in the domestic market. “They (Tata Motors) have no option but to export," said Shrinivas.

He cautioned that exposure to a market like Africa will involve the risk of repatriating the earnings, owing to the currency volatility facing the region.

After expanding briskly for nearly two years, sales of medium- and heavy-duty trucks are moderating as replacement demand—one of the key drivers of growth so far—has started to wear off.

Weak freight rates and lower demand for cargo trucks too have dented volumes.

Sales of such vehicles have been sliding for the past three months. It dropped 10.76% to 20,537 units in August from the year-ago period, according to the Society of Indian Automobile Manufacturers (Siam).

“It’s an aberration, as sales usually pick up after April. If this continues in the months ahead, it will be an indicator of the beginning of a down cycle," said India Ratings’ Shrinivas. But Pisharody is not much worried and is not reading much into it.

“It’s too early to call it a trend," he said, adding that the “pipeline is robust and inquiries still high. There’s some impact of monsoons. From the macro side, it’s all good."

He expects it to rebound from October, when pre-buying, owing to a change in emission norms next year, kicks in. It will also be aided by the festive season and a good monsoon.

However, he added that a clearer picture on truck sales will emerge after the date for implementation of the goods and services tax (GST) is announced. If the government does stick to its April deadline, it will lead to the postponement of purchases as prices will come down after implementation of the GST.

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Published: 13 Sep 2016, 09:27 AM IST
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