07:00 pm, Wednesday 08 Nov 2017

Trucks market moving from economic to value-addition

Automotive Products Finder

Medium and heavy commercial vehicles (MHCVs) segment is expected to grow at around seven to nine per cent in FY18. And to tap this segment, OEMs today are offering vehicles that are equipped with future-ready technologies, which provide value-for-money proposition to fleet owners.

In January this year, when a truck of Durgesh Packers and Logistics in New Delhi was stolen, the owner Jagdish Chaudhary didn’t panic. Immediately, he informed the police who were able to track and seize the vehicle within 48 hours. Thanks to the vehicle tracking system, which was fitted in the vehicle, the authorities were able to locate the position of the stolen truck in real time and take appropriate action. Value-added services like fleet management system (FMS) have now become a common feature of trucks used by fleet owners. No surprise the demand for value trucks is going up.

THE YEAR SO FAR

There is good news on the commercial vehicle (CV) industry front. After a tepid first quarter in 2017-18, the commercial vehicle (CV) industry has seen continuous growth in Q2. Importantly, sales of the critical MHCV segment have maintained a steady upward trajectory in the last few months. The entire MHCVs segment registered domestic sales of 31,086 units in September 2017 up by 25.61 per cent compared to 24,748 units in September 2016.

At the same time, the heavy duty (HD) trucks market in India is moving away from basic economy trucks to value trucks. The mid-market or value truck is expected to be the fastest growing category in HD commercial vehicles segment in India. Larger engines (seven to nine liters), fuel efficiency, increased safety and comfort, and telematics are key features of value trucks.

With growing volumes, regulatory changes, and the entry of new global players, customers are looking beyond a low-cost product to increase productivity and efficiency. Fleet operators are also showing interest in upgrading their fleet and moving away from basic economy truck to value trucks.

“Yes, we definitely see this trend growing among fleet operators. Five years ago when we entered the market, we offered anti-lock braking system (ABS) on our range as a standard before it became a norm, as well as crash-tested steel cabins. Today, many of our customers are repeatbuyers because they understand the value offerings a BharatBenz truck provides them, and new customers come to us for the same reasons. Safety, fuel efficiency and driver comfort are some of the vital transformations that our products have addressed,” states Rajaram Krishnamurthy, Vice President, Sales and Marketing, Daimler India Commercial Vehicles.

All-new BharatBenz heavy-duty truck range offers safety features such as LED accented lamps and dual chamber head lamps for better visibility; reverse camera and display to cover blind spots (standard in the premium variant); tubeless tyres for higher stability and tire life; Air-conditioning to keep the driver fit and alert (optional equipment); cruise control for fatigueless driving; and fuel theft protection device.

VALUE TRUCKS DEMAND GOING UP

The MHCV segment is witnessing strong growth in demand on the back of the SCR (selective catalytic reduction) technology for meeting BS-VI emission norms, infrastructure development and restrictions on overloading creating higher demand for new high tonnage vehicles. Commercial vehicle makers, on their part, are increasingly providing value-added services in their products such as use of telematics, driver comfort, safety, etc.

R T Wasan, Head of Sales and Marketing, CV Business Unit, Tata Motors, explains, “The heterogeneous nature of traffic, high degree of undisciplined driving, lack of trained drivers and education are major factors responsible for accidents on Indian roads. This in turn has resulted in an immediate need for defensive driving on Indian roads. Also, over the years, elements such as an increased demand for better comfort, quality, connectivity, rapid turnaround, easy maintenance, and safety have added up to the need for developing vehicles with improved design, connectivity and safety. Deployment of advanced driver assistance systems such as driver health monitoring, lane departure warning, collision mitigation system, telematics and improved vehicle designs contribute substantially to improved road safety.”

Value trucks currently account for less than 10 per cent of the market, with volatility in freight rates, high fuel prices, and overcapacity slowing investment. Nevertheless, user focus on higher productivity, efficiency and lower total ownership costs will steadily push value truck growth rates ahead of the economy trucks segment, according to Frost and Sullivan – a market research agency.

CONNECTED FLEET

New digital technologies are expected to receive rising industry interest, with telematics and business models adapting to these changes. The industry is also witnessing increasing product and market convergence as value truck segment rises in prominence.

“Today, telematics has changed the way for logistics businesses. Ensuring safety and security to fleet owners, telematics offers advanced features to monitor the fleet and ensure ease and simplicity of operations. The Tata FleetMan offers best in class solutions to help customers track and control vehicles anywhere in the country with a wide range of features like real time monitoring, geo-fencing, trip review, alert reporting and trip management. Recently, one transporter was able to recover his lost vehicle, which was picked up by thief, through Tata fleet management system,” informs Wasan.

The sale of value trucks is expected to grow largely at the expense of the low-cost multi-axle truck market. With increasing demand from fleet operators for value trucks, OEMs are developing products to meet the evolving customer needs. Proliferation of electronics and connected truck technologies are creating new logistics business models. Green, safe, connected, and, hence, smart trucks are experiencing rising demand.

Krishnamurthy says, “As the world’s leading CV manufacturer, Daimler is actively driving the exciting opportunities that can be leveraged by connecting commercial vehicles. This also applies to India, where we are exploring various cutting-edge developments and solutions. Our focus at BharatBenz is to support our customers in maximising their profits, eg through intelligent solutions for managing their fleets in an optimal manner, or to minimise unplanned downtimes. We believe there is a significant potential for efficiency improvements in the logistics industry by reducing ‘waste’ and improving the utilisation of assets. We will help our customers leverage those efficiencies with best-in-class trucks and corresponding new technologies.”

REGULATORY PRESSURE

The three key factors driving the demand for value-added CVs are need for high truck productivity and fuel efficiency, increase in consolidation in transport sector, and regulations on safety and emissions. The government’s pressure for emission reduction is having an effect. It has led, for example, to higher emissions transparency, making the tracking of all emissions more feasible over the entire value chain. When the production of emissions while driving is monitored more rigorously, it is easier to engineer solutions for controlling it.

Krishnamurthy explains, “Regulatory changes like the new emission norm of BS-IV and GST have spurred the demand for value-added trucks, as only modern trucks are able to deliver what is needed in the new world of borderless pan-Indian transportation. More and more customers are asking for higher uptime, superior comfort and safety features, reliability and durability. We also offer increased service intervals, making for lower maintenance cost, and a best-in-class warranty of up to fi ve years.”

The poor availability of drivers and growing importance of comfort and safety are forcing OEMs to pack value-added services in their commercial vehicles for increased uptake and customer retention.

“Our commercial vehicles are currently provided with the mandatory as well as other safety features such as ABS, rear underrun protection device (RUPD), side underrun protection device (SUPD), front underrun protection device (FUPD), driver and co-driver side mirrors, wide angle mirrors, close proximity mirrors, speed limiting device/function (SLD/SLF) etc. Our cabins offered in all commercial vehicle segments fulfi l all mandatory requirements as per automotive industry standards (AIS) notifi ed by GoI for interior projections, survival space, wiping system, fi eld of vision, safety glasses etc. Apart from these, we also provide safety features which are non-regulatory requirements such as side impact protection beams and full-frontal crash requirements to improve safety of the vehicles,” states Wasan.

VALUE-ADDITION BEYOND PRODUCTS

With rapid economic growth triggering demand for higher goods movement across the country, fl eet operators are looking to move towards higher displacement and power, fuel-effi cient engines. They are not just looking at value-added products, but also at value-added services. And CV makers are leaving no stone unturned to meet their requirements.

Sharing Tata Motors plans, Wasan says, “We will be further strengthening the value added facilities like insurance options as well as fi nancing by entering into leasing agreements and fi nancial tie-ups providing transporters to fi nd their vehicles in varied ways that suits their business. We are also working on the second hand vehicle market as replacement demand is expected to rise in the coming years. Assurance and good value for old vehicles are all areas which have good scope of improvement for the industry especially in light of the ever-changing registration regulations.”

With focus shifting to greater productivity and effi ciency, lifecycle cost is gradually becoming a bigger deciding factor in fl eet purchase decisions than upfront cost. Thus, total cost of ownership (TCO) has become a major purchase infl uencer.

“Only if we can add value to our transporters better than others, can our CV business grow. We are very serious about the value we provide to our customers and look at our relationships beyond the sale of a vehicle. It’s a relationship of trust. We believe in giving an overall economics so that the TCO is the least over the lifetime of the vehicle and we can retain our customers for lifetime,” says Wasan.

GOING BEYOND INDIAN BORDERS

According to Frost and Sullivan, market- leading, homegrown players will have to invest more in technology as well as look for more opportunities in export markets. Demand for value trucks, along with economy trucks, is slated to increase in the emerging markets, thus supporting Indian manufacturers’ efforts to export. Some companies have already started their overseas quest, while others are expected to follow soon.

“Tata Motors ventured into the international market through a partnership with DIMO in 1961 for CV’s. Today, we are present in over 60 markets and our mission is to be passionate in anticipating and providing the best vehicles and experiences that excite our customers globally. Intense product focus, quality manufacturing, enriched purchase experience and consistent quality in service are the pillars on which our strategy is based. We will enhance our presence in emerging markets, with a special focus on ASEAN, Asia, Africa, Middle East and Latin America though a range of world class products like the Xenon, Super Ace, Prima and Ultra range of trucks,” discloses Wasan.

According to a report by Strategy&, a global strategy consulting fi rm and a subsidiary of Pricewaterhouse Coopers (PwC), India’s truck production, infl uenced primarily by rising domestic demand but also by growing exports, will more than double in the near future. As per the report, India has potential to export 10 per cent of its production by 2020. MNCs,too, are eyeing to tap the overseas market using India as a manufacturing hub.

“We sold more than 55,000 BharatBenz trucks within less than fi ve years after our market launch in September 2012, which no other newcomer has ever achieved in India. We continue to follow a sustainable growth path. That’s also true for our exports business, in which we exported more than 10,000 trucks to close to 40 markets on three continents since 2013,” says Krishnamurthy.

The removal of check posts at state borders due to the implementation of GST has reduced the time taken to transport goods across the country by 10-15 percent. Industry experts expect a growth of around seven to nine per cent in the MHCVs segment in FY18. To reap maximum benefi t, OEMs will have to offer vehicles with future-ready technologies and low overall cost of ownership.

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