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The majority of the expected 11 per cent growth would be due to the cargo segment, which also accounts for around 84 per cent of the M&HCV industry. However, it would take some more time for the M&HCV see higher level of growth.
As the market revives, all key stakeholders should be prepared to ride the wave of growth by proper measures to get the maximum out of the momentum, said Wilfried G Aulbur, managing parnter India, head automotive Asia, Roland Berger Strategy Consultants Pvt Ltd.
"The OEMs (Original Equipment Manufacturers) should move the focus away from discounting and rely on value addition and aftersales services as key differentiator. Transporters should proactively invest in enhancing their fleet and the government should continue focus on pro-growth initiatives and improve the toll systems," he said. He added that while the market has improved, the discounting by the OEMs still continues, which is having a negative impact on the market.
The sector is highly correlated with the Gross Domestic Product (GDP) and the M&HCV cargo segment will be the first segment within the CV industry to rebound as the economy recovers.
Tata Motors continue to dominate the market with around 57 per cent market share in the overall M&HCV cargo industry, which was around 196,000 units in FY15, though it has lost share over the last few years with other OEMs such as Ashok Leyland Ltd. Ashok Leyland has around 27 per cent of this market. The overall industry is dominated by Tata Motors and Ashok Leyland having around 80 per cent of the majority of the segments. Rising competition and evolving customer demands have motivated the key players to launch new products, such as Tata's Prima and the Captain series from Ashok Leyland.
After 16 per cent drop between FY11 and FY14, the M&HCV cargo has grown by 21 per cent in FY15, mainly driven by the rigid and tractor trailers. Within this segment, rigid vehicles account for around 50 per cent of the share followed by Intermediate Commercial Vehicle (ICV) cargo at around 19 percent. Haulage tractors have grown the most over the last year with growth of around 105 per cent, said the report.
The M&HCV cargo segment is expected to grow by around 12 per cent over the next five years, and the trend towards higher tonnage vehicles is expected to continue.
Higher growth was seen in the 35.2 tonnage to 40 tonnage and the 40 tonnage to 49 tonnage tractors and trailers. The 31 tonnage segment increased by around 53 per cent over the last year, driven by customer preference for higher tonnage. Around 92 pe rcent of the 31 tonnage segment is dominated by Tata Motors and Ashok Leyland and the latter is the fastest growing OEM in this segment, it said.
The average capacity utilisation of the industry dropped from 70 per cent in FY12 to around 53 per cent in FY14. While it has marginally improved in FY15 to around 55 per cent, showing improvement of capacity utilisation by all the OEMs except Mahindra and Mahindra, it is still a worry for the industry. New investments are expected to be in new product development and not capacity addition as there is already excess capacity in the system, it said.
Financiers felt the heat and the banks and NBFCs have strengthen their loan terms to control delinquencies. While truck operators are sensing optimism with the freight rates risen on an average by 20 per cent in second half of FY15, transporters continue to face several challenges including the rising operating costs, poor road infrastructure and inefficient toll system, added the report. Most operators feel it would be another six months before the economic revival is in full motion.
The report recommended that while it is difficult for the OEMs to create their niches in the touch competition, they should create a Unique Selling Proposition in terms of Best in class aftersales organisation and not just rely on sales drive revenue. The transporters, who has freezed fleet replacement for last two years, has to look at fleet replacement to be ready for the rise in demand and understand how Goods & Service Tax (GST) will impact their business and plan future business strategy accordingly.
The government should continue to plan and execute pro-business policies and campaigns like Make in India and implement the policies properly, added the report.
