Mahindra's Gio forces competitors to think of a similar product

Mahindra & Mahindra’s October launch of the Gio, a half-tonne, four-wheeler goods vehicle, has impelled other big auto companies such as Bajaj Auto, Piaggio and Tata Motors to have a similar offering. The Gio is priced at Rs 1.65 lakh (uniform across the country) and is the cheapest four-wheeled goods truck.

Ravi Chopra, CMD of Piaggio Vehicles, the largest three-wheeler player in the country, says a half-tonne Ape variant would be rolled out in the first quarter of 2010, referring to the company’s four-wheeler 850-kg Ape truck.

Rajiv Bajaj, MD of Bajaj Auto, says his four-wheeler commercial vehicle (CV) project will also consider the sub-1 tonne segment, including the 500-kg and 750-kg carrying capacities. “We will be in the sub-1 tonne segment. Our research and engineering centre is working on these platforms,” he says.

Tata Motors, which launched the country’s first 1-tonne goods carrier truck, called the Ace, is also studying the market response to Mahindra’s Gio. Ravi Pisharody, its president (commercial vehicles), says the company may consider the half-tonne, four-wheeler segment as a part of its strategy to occupy every segment of the CV vehicle industry. The Ace is already available in the 750-kg and 1-tonne payload capacities.

“We have made it clear that we will enter every segment in which we spot an opportunity. The Ace and the Winger are good examples of this strategy. If we have plans for the half-tonne segment, we will announce it,” Pisharody says.

Tata Motors’ 1-tonne Ace was introduced in 2005 and was the first vehicle of its kind in the domestic market. Within three years, the Ace had impacted sales of large-bodied three-wheelers and trucks that are less than 3.5 tonnes.

From April to October 2009, the industry sold 10,160 units of large three-wheeler goods carriers, a dip of 28 per cent. Whereas, 110,160 four-wheeled light CVs (LCVs) were sold in the sub-3.5 tonne class, a healthy growth of 24 per cent.

The sub-1 tonne goods carrying segment, comprising the three- and four-wheelers, is called the last mile segment (LMS). “The last mile segment connotes the area that needs to be covered from the highways right to your door step. This cannot be traversed by large trucks. A 1-tonne or 500-kg vehicle will do the job. This market is a growing one. In future, you will see numerous segmentations,” says R C Maheshwari, CEO (commercial vehicles) of Bajaj Auto.

In terms of size, the LMS is pegged at around 15,000 units a month. It consists of goods-carrying vehicles in the 1-tonne and lower carrying capacities. Around 5,000 units of three-wheelers and around 10,000 units of four-wheelers contribute to this segment. Industry executives expect this segment, comprising largely of four-wheelers, to grow by over 10 per cent per annum in the coming years.

Mahindra’s aggresive pricing of the Gio has been their key selling point. It is cheaper than the price of a comparable, large-bodied, three-wheeler goods carrier, which sells at about Rs 1.70 lakh, and close to the price of a mid-range three-wheeler, which is around Rs 1.3 lakh.

Around 7,000 units of three-wheeler goods carriers are sold every month. Piaggio Vehicles has a market share of 56 per cent in this segment. Mahindra & Mahindra is next, with 16 per cent, while Bajaj Auto has 11 per cent.

The biggest draw for CV manufacturers to get into the half-tonne segment, like the Gio, is the opportunity it presents for current three-wheeler operators to upgrade to a four-wheeler. “The cost of acquisition of the Gio is very attractive when compared against a three-wheeler purchase. For about Rs 500 more in EMI (equated monthly instalments), an operator can own a four-wheeled Gio rather than buy a three-wheeler,” says Pawan Goenka, President of M&M. The company sells three-wheelers, too, in both the passenger and goods carrier segments. The second reason for CV manufacturers wanting to enter the segment is the robust growth. The 1-tonne LCV segment, comprising models like Tata Motors’ Ace, has impacted sales of the wide-bodied three-wheeler and has also taken away business from the large CV segment of less than 3.5 tonnes.

“The entry of the Gio will impact sales of three-wheelers, going forward. The aggressive pricing, combined with the aspirational values the Gio offers for a current three-wheeler operator, will impact sales of large three-wheelers,” says Ravinder Singh, President (Marketing & Sales) of Force Motors. Prices of his multi-utility three-wheelers start at Rs 1.80 lakh.