No commercial vehicle (CV) market has changed as much as India’s over the past few years, and the next decade promises an equally robust rate of disruption. Making sense of where these changes are leading in the next ten to 15 years is no easy feat, but the first step comes with identifying what forces are impacting the sector. This is exactly what Vinay Raghunath, Partner Automotive Practice, EY, did in his keynote address at HD Truck Pune, a conference organised by Automotive Megatrends and dedicated to the stakeholders responsible for shaping India’s CV industry.
It helps that the current macroeconomic conditions are favourable. “We are all in a promising market, from the sheer size in terms of population and the sheer depth of our domestic consumption to the spending increase expected over the next few years due to the growing middle class,” Raghunath told conference attendees.
Players need to leverage these macroeconomic fundamentals as well as the numerous government initiatives and investments plans. New funding has been promised for infrastructure, for example. At the same time, the Make in India initiative is designed to support local manufacturing projects. These developments are shaping the foundation of the CV industry but in the foreground new emerging megatrends have begun to play out.
Customers and dealers
Customers themselves are evolving. They are walking into truck dealerships at a younger age and better informed of what they want. “It is an evolving customer we are talking to. The understanding of what he or she wants from the product has evolved. The awareness of what multiple products offer is also fairly evolved,” said Raghunath. “Multiple customer needs are now mapped to product attributes. Companies need to figure out how to ensure attributes of their product meet all the emerging customer needs.”
The whole retail operating model itself is also in flux. Companies have started questioning what it takes to have a retail operating model that is aligned to what consumers need as well as the kind of product portfolios that will be launched over the next few years. They are examining not only the sort of products they should sell but also the type of services they should provide. Telematics in particular offers considerable monetisation opportunities. These questions are important for the wider dealer fraternity as well as the manufacturers.
“The one who adapts best to a retail model of the future is the one who gets closest to what consumers are demanding in terms of their buying process,” Raghunath explained. “This is the one that will be able to maximise profit.”
India’s trucking industry is undergoing a slow but steady segment shift, with predictions calling for much greater use of heavy tonnage vehicles in the near future. The implementation of a goods and service tax (GST) earlier this year is one of the key factors behind the shift. GST creates a single market across the country for the first time and could allow for larger trucks travelling longer distances. More long-distance travel demands heavy duty, high tonnage vehicles.
“There have been multiple predictions on how the industry will become skewed towards big tonnage vehicles at one end, and with low payload vehicles for last mile connectivity at the other end,” observed Raghunath. This could mean significant changes for the retail operating model. Players need to start thinking about possibly amending their delivery mechanism, consumer connectivity mechanism and sales platforms to align to this potential new reality.
The Indian CV industry will also be shaped by the wider developments in multi-modal logistics. The interface among transport via rail, water and road is evolving and the government has clearly stated its intent to increase the wider multi-model infrastructure. “There have been multiple freight corridor announcements and multiple port announcements. Given that context, how is this interaction among road, air and water to play out?” asked Raghunath. “What will change from an operating model perspective for those already in the industry?” The answer is ‘plenty’ – from the current freight rates to the shipment patterns if the entire multi-modal nature of the market changes.
Whether it is technology inside the vehicle or technology streamlining supply chain operations or even technology connecting companies with customers, players in India are impacted by growing digitalisation. “While our industry is a leading indicator of what’s happening in the economy, many people often regard it as a laggard in embracing digital trends and technology,” Raghunath observed. That could change in the next decade if there is a significant shift towards embracing newer and more agile technologies.
“A few years ago I was talking to an OE about leveraging block chain technology. At the time very few people understood the concept let alone how to execute it,” he added. “We need to figure out how to upscale ourselves and understand the implications of the capabilities from a business value perspective.”
While the answers to these questions are not always clear, what is clear is that change will continue to reshape the Indian market in the years ahead.