India’s commercial vehicle market is in transition from being a supply-driven segment to one that is pushed by demand. With the recent entry of several international players and car OEMs announcing plans to enter the LCV market, the sector is expected to undergo significant changes over the next decade
Future commercial vehicles on Indian roads are expected to feature advanced electronics, efficient fuel systems and have an increased lifetime. These factors alone are certainly significant game changers, but the most important market development is expected to come from how new entrants challenge the long-standing duopoly of domestic giants Tata Motors and Ashok Leyland, which currently hold around 80% of the market.
After experiencing year-on-year growth of 30% in 2009-10 and 2010-2011, the CV industry – mainly the medium and heavy segment – has remained flat for the past two years: slowdown in industrial growth, weak investment sentiment and significant fleet capacity addition have all adversely impacted the market.
It is, however, interesting to note the variation in growth rates for LCVs and M&HCVs in 2011-12 and 2012-13. While LCVs have sustained growth momentum, poor performance of M&HCVs in 2012-13 led to an overall contraction in the market of 2%. The slowdown gradually crept into the LCV segment in Q1 2013-14 too, prompting a sales decline of 3.9% year-on-year.
With a challenging near-term macroeconomic outlook (at the time of writing, sales of medium and heavy-duty trucks have been declining for 17 consecutive months), demand for CVs is expected to remain subdued over the next several quarters.
Regardless, long-term indicators continue to be bullish, as tailwinds – such as expectations of economic growth improvement, structural changes and progressive infrastructure development aiding the demand for trucks – are expected to gather steam.
The next wave of growth
By the end of the current decade, the Indian CV sector is expected to have evolved along the lines of an already developed market. Improving road infrastructure, rapid urbanisation, tightening emission and safety norms, consolidation of fleet operators and increased focus on the total cost of ownership, are all expected to shape the industry’s evolution.
One particularly notable driver of growth will be the evolution from disorganised manufacturing and retail to a more structured form, leading players to invest in transportation and logistics. Demand for both self-managed CV fleets and third-party providers will thus increase, boosting the overall market…
Manmeet Malhi, EOS Intelligence
This is an excerpt from an article first published in the Q3 issue of Megatrends magazine, to continue reading, simply download your free copy and turn to page 56.
Megatrends Q4 will be published in mid-December at awmegatrends.com/emagazines.
