Top trends in commercial vehicles market - ICRA Research
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OEM Corner
Top trends in commercial
vehicles market
Improved economic activity, higher construction and road infrastructure development and
improvement in mining activities helped India's commercial vehicles industry register its
highest sales performance in 2017-18. With BS-VI emission norms to be implemented from April
2020 and fuel prices skyrocketing, CVs industry is all set for interesting changes in the next few
years, says Rakesh Rao.
D
riven by strong performance grew at around 41.7 per cent which the economic revival in the country,
of the truck segment, includes 54.9 per cent growth in MHCVs cargo demand has been healthy, offering
India's commercial (medium and heavy CVs) while LCVs further impetus to growth. Additionally,
vehicles (CVs) industry (light commercial vehicles) recorded a sectors like auto carriers, 3PL players,
reached its highest sales growth of 34.4 per cent. This was partly cement, steel and oil tankers have also
peak after 5 years in 2017-18 with 856,453 due to a lower base in April-June 2017 contributed to growth. Supported by
units being sold. “The CVs industry when the MHCVs industry hit the bottom positive underlying factors like pent-up
reported strong growth in 2017-18, with on account of the transition to BS IV demand post GST implementation and
volumes expanding at 20 per cent compared emission norms after Supreme Court of macro-economic recovery, the growth
to 2016-17. The industry recorded a 42 India’s sudden ban on BS III-complaint momentum is expected to continue in
per cent year to date (YTD) growth in CVs from April 1, 2017, which led to a 2018-19 as well, with M&HCV (trucks)
2018-19. Among the various sub-segments significant pre-buying in March 2017 and expected to grow in the range of 18-20 per
of the CV industry, the goods carrier/ inadequate supply of BS IV-compliant cent,” opines Shamsher Dewan.
truck segment expanded healthily in both vehicles during April-June 2017. Further, According to Shruti Saboo, the
periods, while the passenger carrier/bus GST implementation from 1 July 2017 also growth in MHCV is supported by several
segment has revived in the current fiscal led to dealers liquidating their inventory fundamentals like improved economic
post a year of subdued sales in 2017-18,” as well as deferral of purchases from activity as indicated by the Industrial
states Shamsher Dewan, VP Corporate consumers in anticipation of lower prices Production Index (which has remained
Ratings ICRA. post GST.” close to or above 4 per cent since
The robust growth of CVs industry November 2017), higher construction
comes on the backdrop of a lower M&HCV growing stronger and road infrastructure development and
base which saw the implementation of Growth in the M&HCV (truck) segment improvement in mining activities which
Bharat Stage (BS) IV rules and GST was robust at 19 per cent in 2017-18 and has seen a positive growth since March
implementation. Shruti Saboo, Associate 62.5 per cent in YTD 2018-19, supported 2018. “While the growth momentum is
Director, Corporate Ratings, India Ratings by pickup in industrial and infrastructure likely to continue in 2HFY19, the growth
and Research (Fitch Group), says, “In projects, particularly roads, irrigation rate would moderate due to higher base.
April-August 2018, commercial vehicles and affordable housing. “Bolstered by GST implementation has also enabled
4 8 Automotive Products Finder | october 2018 | www.APFIndia.com
OEM Corner
Table 1: Domestic CV sales
2017-18 2016-17 % Change
No of CVs sold in domestic market 856,453 714,082 19.94 per cent
Source: Society of Indian Automobile Manufacturers
18-20 per cent growth in 2018-19. Over PwC India.
the medium-term, the segment would The bus segment reported softening
LCV (Truck) segment also benefit from roll-out of GST and its of sales in 2017-18 with 14 per cent
is on a structural uptrend impact on logistics sector and preference de-growth, primarily due to lower order
for hub-and-spoke model.” inflows from SRTUs (which accounts for
and would continue on its
LCV sales volume grew around 36 per one-third of bus sales in India). However,
growth trajectory during the cent YoY (year-on-year) in April-July 2018. sales picked up in the current fiscal, with
current fiscal, with 18-20 per “Ind-Ra expects a continued strong demand 19 per cent growth so far, albeit on the
cent growth in 2018-19. in the LCV segment in 2HFY19, albeit low base. Sruthi Thomas, Senior Analyst,
at a lower rate due to a high base. LCV ICRA, opines, “While volumes in the
demand will be supported by improved larger >12T segment has recovered,
- Shamsher Dewan,
demand from the rural segment, last-mile growth will be led by the
OEM Corner
Top 5 trends in CVs
According to Shamsher Dewan, VP Corporate Ratings ICRA, some of the
key long-term trends visible in the CV industry are:
1. Shift towards higher-tonnage trucks: Over recent years, there has been
increasing preference for higher tonnage trucks. Accordingly, the average
tonnage per truck sold in India has increased from 14T in 2008-09 to
We see adoption of 18T in 2017-18. This has been aided by multiple factors including lower
cost of operations, consolidation of warehouses, improvement in road
electric and hybrid bus infrastructure, stricter implementation of overloading restrictions,
witnessing fast growth. shortage of drivers and availability of higher tonnage truck models
However the operating among others.
economics of these vehicles 2. Expected increased competition from railways: With the commercialisation
of Dedicated Freight Corridors and the strong focus on shifting
will be crucial for their long
transportation towards cheaper and more efficient modes of
term viability. transportation like railways, ICRA expects the road segment to face
increased competitive intensity going forward.
- Kavan Mukhtyar, 3. Evolving regulations: There has been increased tightening of emission
Partner & Leader - norms and safety standards, in addition to greater focus on driver
comfort and assistance, which has been and would further increase
Automotive, PwC India
the capital costs associated with CV ownership.
rather than MHCV goods carrier. Further 4. Alternate fuel adoption: Alternate fuels like LNG and electric vehicles are
as MHCV is majorly used for long distance expected to witness increased adoption over upcoming years, although
goods transportation, a huge infrastructure development of infrastructure for the same and pricing of the vehicles
set up across the nation would be required remain the key concerns.
to make it viable.” 5. Increased use of telematics: Upcoming technologies like connected
Currently most of the CVs in India run trucks, fleet management systems etc are likely to improve efficiencies
on diesel and the penetration of non-fossil in the system and lower overall cost of operations.
fuel powered CVs in the country remains
quite limited, especially in the truck related to permits, the adoption would BS-VI norms, fuel burn efficiency will have
segment. Among the various non-fossil gain pace when challenges related to to improve, which will entail engines to
fuels available commercially, CNG is now infrastructure get addressed. “As per withstand greater pressure which would
well accepted fuel for running vehicles, industry estimates, LNG fueling stations require certain changes in engine design
globally. However, the penetration of other are likely to be more expensive than and more specifically materials that
fuels, even LNG is still relatively miniscule. diesel due to complex storage facility and will be used for manufacturing,” opines
In order to bring down fuel import bill fueling requirements. Hence, setting up Shamsher Dewan.
and encourage usage of non-fossil fuel fueling infrastructure supported by a well In addition, to control tail pipe
consumption, Union Transport Minister executed Government policy will remain emissions (ie NOx, PM), diesel particulate
Nitin Gadkari recently announced that CVs key. Additionally, pricing of LNG-based filter (DPF) hitherto not present in
using non-fossil fuels will be exempted vehicles will also be an important factor, vehicles will become mandatory besides
from permit requirements. But, will this especially in the Indian context given the components for SCRs and EGRs. Shamsher
move propel sales of CVs running on non- fragmented nature of logistics industry. Dewan adds, “CV OEMs are currently in
fossil fuels? Kavan Mukhtyar answers, Accordingly, development of cost effective the phase of developing these new vehicles
“This would affect only the bus segment technologies, projected economies of scale and testing them prior to the nation-wide
(passenger) with adoption of CNG being and potential subsidies by the Government implementation in April 2020. VECV
the highest among the alternate fuels. to promote LNG will determine the has already developed and certified a BS
We see adoption of electric and hybrid acceptance of LNG-based vehicles going VI compliant CNG vehicle recently, and
bus witnessing fast growth. However the forward,” says Shamsher Dewan. further such roll-outs are expected by the
operating economics of these vehicles will various CV OEMs over upcoming months.
be crucial for their long term viability.” Changing emission norms With a price differential of 8-10 per cent
In India, currently, although some With BS-VI emission norms to be expected with existing vehicles, this is
development and testing work has been implemented from April 2020, vehicle likely to result in significant pre-buying
ongoing regarding the use of LNG-powered technologies are likely to witness during 2019-20.”
vehicles, the same is in the pilot stage and significant upgradation, with major changes With the industry preparing itself for
challenges related to LNG infrastructure in engine design and after treatment transition towards BS-VI norms, both
etc continue to exist. More than exemptions systems. “For instance, to meet stringent OEMs and auto ancillary are incurring
5 0 Automotive Products Finder | october 2018 | www.APFIndia.comOEM Corner
Continuous increase
in diesel rates would impact
the profitability of smaller
fleet operators and, thus, in
turn impact the demand for
additional fleet.
- Shruti Saboo,
Associate Director, Corporate
Ratings, India Ratings and
Research
capex and R&D towards the same. Goldstone-BYD, Ashok Leyland-Optare,
Shruti Saboo observes, “The OEMs and etc) have entered into collaborations with Growth momentum to continue
ancillaries with presence in global markets foreign entities for technology related The commercial vehicle industry is in
are better verse with the new regulatory to electrification. According to Sruthi the midst of several regulatory changes
norms. Ind-Ra also notes that several Thomas, technology availability is not and technological changes focused
technological tie-ups with global players expected to be a key deterrent for CV towards emission and safety norms,
are happening in the ancillary space to gain electrification in India. Nevertheless, ICRA telematics, and driver comfort. “The
access to required technology. Given that expects the electrification of CV segment upcoming regulatory changes include
the judiciary did not extend the timelines to be a slow process in the country, which BS VI, scrappage policy for CVs aged
related to BS-IV transition in the past would start with buses and LCVs initially, over 20 years, and the higher axle load
which created a short term blip in the CV and roll-out to M&HCV (trucks) only over norms announced in August 2018 which
industry, it is likely that OEMs would a longer time frame. would require several upgradations
launch BS-VI compliant vehicles before Shruti Saboo adds, “A shift towards from OEMs. These include features like
the timeline of April 2020.” EVs would also depend on economic emergency button, advanced navigation
viability of EVs in relation to internal system, dual panel cabins, new criteria
Electrification of CVs combustion engine and inadequate on body building which are likely to
As the government has put strong focus resources of lithium and cobalt in India.” become mandatory in coming years,”
on electric vehicles within the country, Although electric CVs market at opines Shruti Saboo.
public transportation fleets are likely present is miniscule, it is enticing OEMs Historically, the industry has seen a
to take the lead in electrification. The and their suppliers to invest in technologies lot of pre-buying and stock pull. FY19-
same is already underway, with some to meet the requirements of the future. FY20 may also see some pre-buying of
SRTUs and city transport bodies placing “We see traditional OEMs launching CVs before BS VI takes effect. OEMs
orders for electric buses. This includes a range of hybrid and battery electric have also announced that their product
order for 25 buses by Himachal Road vehicles in the CV segment. Also a host plans are place and are well-prepared for
Transport Corporation, 100 buses by Thane of new players are into these segments. the shift to BS VI. BS VI compliant fuel
Municipal Corporation, 150 buses by Primarily there are 4 major components availability is also being ramped up to
Bangalore Metropolitan Transport in an electric powertrain - battery pack meet the deadlines.
Corporation and 6 buses by Brihan & BMS (battery management system), “We expect continued regulatory
Mumbai Electricity Supply & Transport motors, power electronics and integrated volatility challenging the commercial vehicle
Undertaking. “With an annual replacement transmission. Battery and motors contribute industry. Competitors will have to be agile
demand of approximately 15,000 buses for to more than 60 per cent of the vehicle and resilient in their response to the market
SRTUs, there exists sizeable opportunity cost. Chinese and Japanese suppliers are changes. Companies will have to focus on
for increase in e-bus sales in India,” opines the major suppliers to the Indian market. cost reduction to ensure profitability while
Sruthi Thomas. We are witnessing growing interest from relooking at their organisation structure
To tap the emerging opportunity, many Indian component makers into this space,” to be fast paced in the market,” concludes
Indian OEMs (including JBM Auto-Solaris, explains Kavan Mukhtyar. Kavan Mukhtyar.
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