Medium and Heavy Commercial Vehicles Industry



With the economy growing at an astounding rate of more than 9% a year, the transportation industry is growing at a similar pace. With easing of various norms & regulations for foreign investors to invest money in India , technological improvements have been phenomenal. India is the fourth largest Commercial Vehicle market of the world. The major players being Tata Motors & Ashok Leyland holding a total market share of approx. 91 %.

With lots of Improvements & developments in the Infrastructural projects, the demand for Heavy commercial vehicles has seen a spurt .Though; the industry is facing a severe competition from Railways which is a cheaper mode of transport comparatively.

Major Players in the Field of HCV

•  Tata Motors

Established in 1945, is the leader in the Commercial Vehicles segment and no. 2 in the passenger car market. It is the world's fifth-largest M&HCV manufacturer. Tata Motors's product range covers passenger cars, multi-utility vehicles as well as LCV, M&HCV for goods and passenger transport.

•  Ashok Leyland

Established in 1948, Ashok Motors was set up in Madras for the assembly of Austin Cars. In 1955 with equity participation by British Leyland, the Company's name changed to Ashok Leyland. Since then it has been a major player in India 's commercial vehicle industry.

•  Volvo Motors

• Founded in 1927, Volvo is one of the world's leading manufacturers of heavy commercial vehicles and diesel engines. Today, Volvo has approximately 81,000 employees and production in 25 countries and operates on more than 185 markets.

•  Eicher Motors

Founded in 1982, a part of Eicher Group. It manufactures and markets trucks, buses, automotive gears, motorcycle and deals with the exports vehicles, aggregate and components.

•  Force Motors

Founded in 1950, Force Motors Limited is an enterprise of the Firodia Group (formerly Bajaj Tempo Limited). Recently rolled out the MAN series of M&HCVs

•  Vehicle Factory Jabalpur

Vehicle Factory, Jabalpur established in 1969 is a dedicated manufacturing unit to meet 'Transport Needs' of the Armed Forces

Growth Enablers of M&HCV Industry

Market Induced Factors

•  Robust GDP(9.4%) and IIP (11.3%) growth in 2006-07

•  Freight generating sectors registered robust growth

•  High demand potential replacements with stricter emission norms in offing

•  Favorable demand-supply scenario with buoyant freight outlook

•  Increasing capacity utilization in road freight industry.

•  Introduction of more economical and fuel -efficient vehicles

•  Improved profitability of fleet operators coupled with shrinking replacement cycle for CVs

•  Strong economic activity in the country, leads to increased demand for freight movement by road.

•  Continued strength in freight rates in the last 12 -15 months (up ~5%) and the 12% cut in fuel prices since Nov -06 have adequately compensated for increased cost pressures owing to inflation and rise in interest rates

Govt. Policy Induced Factors

•  Strict implementation of Overloading ban means increased volumes

•  Infrastructure development continued to gain momentum

•  NHAI project completion : 26%

•  NHDP Phase V - 6,500 Kms included

•  Favorable regulatory environment such as changes in emission norms, (BS-III norms implemented in 11 major industrial cities of India from April - 2005)

•  strict restrictions imposed by cities on vehicle age (No MHCV of 8 years or older can ply on Mumbai)

•  Proposed phase-out of CST by 2010 will boost the organized logistics players and in turn the CV manufacture

•  Weighted tax deduction of upto 150% for in-house research and R&D activities.(Auto Policy - 2002)

•  Now 100% foreign equity investment is allowed by the government and does not lay down any minimum investment criterion (Auto Policy - 2002)

The Commercial Vehicle market has in the past shown a cyclic trend, as , it has faced a downturn in 1995-96 and 2000-01, & a similar recession can be expected in the near future. Usually, this is because of excess capacity buildup & a slight correction in demand recently in the first quarter of present fiscal. At the same time the economy is surging ahead at a healthy growth rate and there is a lot of untapped market hitherto a domain of railways which could be tapped into and not to mention the export segment. These factors may help in avoiding the downturn that is possible in short term.

Certain factors that might pose a problem in short term are increasing interest rates for financing, and need for higher expenditure on R&D to meet the environmental norms and competition. These might be offsetted by the deep penetration achieved by finance firms & booming economy and the tax sops on R&D. The overcapacity issue though can become a major one, but will also enable to meet the export sector. All in all it can be said that the short term period is of caution but in the long term, the market is expected to grow well despite the expected revival of Railways.







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