New Delhi: India’s commercial vehicle market—the world’s fourth largest for trucks—is undergoing a rapid shift driven by laws on the overloading of these vehicles, thus opening up the market for light and super heavy vehicle category and leading to record investments in these segments despite the current sluggishness in the market, say industry experts.
In a sign of that change, even as sales of medium- and heavy commercial vehicles dipped 5% in the first half of 2007-08 ended September to 116,082 units according to figures from the Society of Indian Automobile Manufacturers, both Tata Motors Ltd and Ashok Leyland Ltd, India’s top two truck makers who between them sell nine out of 10 trucks, have started making the 49-tonne truck, the heaviest payload allowed in the country. Asia MotorWorks Ltd, the first company here to launch heavy trucks in this category two and a half years ago also launched its second model in the 49-tonne truck segment last December.
Growing demand: Sale of heavy trucks rose by 70% to 146,000 units on the back of a Supreme Court ruling that prevented overloading. (Photo: Vikas Khot/ Hindustan Times)
While the market for such trucks is still small at 3,500-5,000 units annually, it is slated to expand as freight operators increasingly adopt the hub-and-spoke model, where goods are moved between cities on heavy trucks and within cities on small sub-four tonne trucks or light vehicles.
“We see tractor trailers as the fastest growing segment in the haulage industry, with more movement towards higher tonnage vehicles,” said Rajive Saharia, executive director (marketing), Ashok Leyland.
Indeed, sale of heavy trucks rose by 70% to 146,000 units in 2006-07 on the back of a Supreme Court ruling that prevented overloading, which resulted in accidents thus forcing the adoption of the hub-and-spoke model of transportation by fleet operators.
Analysts say that the industry is headed for a turnaround in fiscal 2009, pointing to the likelihood of more investments. “We view the current phase as a consolidation phase rather than a slowdown,” said Chirag Shah, automotive analyst at Emkay Share and Stock Brokers Ltd.
In fact, towards the end of 2007 three major deals between international truck makers and Indian companies were signed. First off the block was the $500 million (Rs1,965 crore) pact between Japan’s Nissan Motor Co. Ltd and India’s second largest truck maker, Ashok Leyland to make light commercial vehicles. This broad agreement is covered under three sub-deals involving truck making, engine manufacturing and technology development.
This was then followed by back-to-back deals with Sweden’s Volvo AB picking up an effective 50% stake in Eicher Motors Ltd and Daimler AG’s Daimler Trucks division forming a joint venture with the Hero Group, which has 26% stake in India’s largest two-wheeler maker Hero Honda Motors Ltd for light-, medium- and heavy trucks.
These partnerships come on top of joint ventures between International Truck and Engine Corp., a unit of Navistar International Inc., and Mahindra and Mahindra Ltd for medium- and heavy commercial vehicles, and MAN Nutzfahrzeuge AG’s tie-up with Force Motors Ltd to make heavy trucks. Foreign truck makers are expected to invest as much as $10 billion in India.
However, unlike passenger cars where service centres can be concentrated inside city limits, trucks ply across the country into the hinterlands on all types of roads and highways. Hence, having an extensive service network is often a strong selling point to freight operators who buy these trucks.
“Global truck makers have focused on high-end products available at higher prices. They will have to slowly convince customers about the value of their products which offer lower cost of operations,” said Amitabh Chakraborty, president (equity), Religare Securities Ltd.
Tata Motors and Ashok Leyland continue to dominate the market. About 468,000 commercial vehicles were sold in the country in 2006-07. More competition is also expected in the light truck segment as new entrants aim to capture a slice of it. Already, Piaggio Vehicles Pvt. Ltd has launched its Ape Truck, while Asia MotorWorks and Bajaj Auto are also set to bring out similar vehicles.