M&M set to challenge Tata, Leyland in heavy vehicle segment

To offer trucks with 16-44 tonne capacity by the end of this year.

For years, Ashok Leyland and Tata Motors have ruled the 16.6 tonne-plus medium and heavy commercial vehicle (CV) market. With a market share of over 90 per cent, they sold over 78,000 vehicles last year.

But Mahindra & Mahindra, the country’s second-largest CV company by sales, is set to challenge their domination by offering trucks with capacities ranging from 16 tonnes to 44 tonnes by the end of this year.

These large CVs will be manufactured by its joint venture company, Mahindra Navistar Automotive Ltd (MNAL), which was set up in 2005. Mahindra holds 51 in the JV. Navistar International Corporation is one of North America’s largest CV makers.

“We will launch in the 16-44 tonne category in the fourth quarter of 2009. There will be more models in this segment,” said Pawan Goenka, president, Automotive Sector, Mahindra & Mahindra (M&M). The planned yearly capacity is 50,000 units.

Goenka said the company would also launch its below-one-tonne truck, a segment dominated by Tata Motors’ Ace, around the fourth quarter of this year. The company will roll out this vehicle independently.

This 16-44 tonne segment is divided into two segments, rigid vehicles and tractors/trailers. M&M will make both.

The medium-large CV market has, however, witnessed a major downturn due to the current slowdown. For the year ended March 2009, sales of rigid vehicles in the 16-tonne and above capacity dipped by 38 per cent, while those in the tractor trailer segment fell by 60 per cent.

“Since larger CVs are dependent on many sectors like infrastructure, mining, exports and construction, a slowdown in these has had a direct impact on sales. However, we see a demand pick-up in the second half of this year,” says Rajive Saharia, executive director (Marketing), Ashok Leyland.

Industry analysts say the timing is right for Mahindra’s entry as the launch will happen just as the demand is expected to pick up.

Mahindra Navistar’s entry will make it the seventh company in this segment. Apart from the big two, there are Eicher Motors, Asia Motor Works, Volvo India, Tatra Vectra Motors and Mercedes Benz.

Vaishali Jajoo, analyst at Angel Broking, says it will take a full year or more for the combine to establish its dealership network and to take on established players like Tata Motors. Jajoo adds: “Since the recovery in sales of heavy and medium CVs is expected in the second half of 2009, the M&M launch is at the right time.”

Saharia says the buyers of these large vehicles are established players who operate a fleet of more than five vehicles each. “Currently, there’s overcapacity. Once economic activities revive, the demand will pick up.”

In 2007, Mahindra signed a second JV with Navistar to manufacture diesel engines for CVs. The joint venture, called Mahindra Navistar Engines Ltd, also has 51 per cent equity participation by M&M. The 16-40 tonne vehicles will be manufactured at the company’s Chakan facility near Pune.