10 February, 2021

2021 Recovery AHEAD!

Author: Girish Wagh, Executive Director, Tata Motors

The commercial vehicle industry is one of the engines of any nation’s progress. It is a central pillar that drives a nation’s development and in India too, the commercial vehicle (CV) industry plays a significant role. It is an integral part that drives every aspect of our daily lives, right from building the roads we drive on to delivering our cargo as well as enabling the mass public transportation space.

The CV industry is cyclical in nature, and every subsequent crest and trough has been higher than the previous one, thereby, maintaining a steady and a secular growth trend in the long run. The industry saw its previous peak in FY19 and since then has been on a decline. Over the last two fiscals, the Indian CV industry has already been battling a slew of challenges that included a tapering down of overall economic growth, increased axle load norms in the M&HCV (Medium and Heavy Commercial Vehicle) segment, and the challenges of BS4 to BS6 transition. Ever since the pandemic took hold, the detrimental effect of these challenges was further aggravated, resulting in unprecedented levels of de-growth across the industry and economy at large. Consequently, the CV industry hit rock bottom in the first quarter of this fiscal.

Throughout the lockdown, our approach was always to protect the ecosystem at large in order to contain the damage and manage the pain. Accordingly, we set up dedicated task teams to reach out to all the impacted stakeholders and worked together more closely to address their pain points, safeguard their businesses and sustain livelihoods. We also continued to support our customers and partners even during the lockdown period, through our extensive nationwide service network to keep the wheels of the nation running. Continuous supplies of food, masks and sanitiser at our workshops ensured uninterrupted supply of essentials first and of non-essentials thereafter amidst the nationwide lockdown.

The unlock led to a gradual increase in the economic activity, which along with a robust rural economy, and blossoming e-commerce led to demand improvement in SCVs and I&LCVs segment, to begin with. Lately, the demand in M&HCV tipper trucks has also started recovering as the construction and mining projects have resumed activities in addition to announcements of newer projects by the central and various state governments. In contrast, the passenger commercial vehicle segment still faces a major predicament as schools are yet to reopen and a major chunk of employees are still working from home. The dwindling domestic tourism industry, as well as the cash-strapped transport undertakings, are few other aspects that have led to slower growth for the buses segment. However, the healthcare sector has fuelled the buying frenzy for ambulances and its demand has grown exponentially.

What may appear to be a faint upside, the challenges faced by the CV industry over the last few years have also offered an opportunity for the industry to reimagine its products and business processes. The BS6 vehicles will prove to be a game-changer for the customer’s business propositions as more and more customers start realizing the potentials of deploying them. Being the industry leader, we at Tata Motors used the BS6 migration, as an opportunity to upgrade and holistically reimage our entire product portfolio. Our new BS6 Indian product range continues to create new paradigms of functionality, productivity, comfort, performance and connectivity. For customers, it is impressively bringing forth the core benefit of lower TCO (total cost of ownership) and enhanced returns to their investment.

Tata Motors is also proud to be part of the government’s electrification drive of mass mobility. The recent delivery of 26 state-of-the-art Tata Ultra Urban 9/9 electric AC buses, marked the commencement of first-ever Gross Cost Contract (GCC) electric bus service to BEST (Brihanmumbai Electric Supply and Transport ). Before this, under the FAME I initiative, we have already supplied 215 electric buses in 5 cities across India, which have been received well by the STU (State transportation undertaking) and the citizens alike. The electric buses cumulatively have clocked more than 6 million kilometres.

While the commercial vehicle sales have shown decent growth in the last couple of months, the magnitude of sales in the upcoming months will significantly depend on the continued pace of economic recovery coupled with the governments’ initiatives. The second half of the financial year will be crucial for the commercial vehicle industry. As the economy recovers and the GDP comes back to its earlier levels, the CV industry will grow proportionately. While the GDP declined to about 23-24% in the Q1 of this year, analysts have predicted that there will be a steady rise in the subsequent quarters of the fiscal and this is going to benefit the CV sector. In short term, increase in e-commerce activities, increase in demand for raw materials as well as announcements of infrastructure activities will collectively boost the entire commercial vehicle industry as well as the CV business of Tata Motors. Scrappage policy is another factor that will play a major role in boosting the replacement demand in the immediate future.

In mid to longer-term perspective, stricter emission norms, progressive increase in demand for EVs in certain specific applications; increased penetration of alternate fuels along with increased adoption of connected services and solutions will continue to shape the CV industry.

index is also improving gradually, indicating a better and a healthier finish to the fiscal. Finally, we anticipate that going forward there is going to be an improvement in replacement demand as customers start to realize the benefits of owning a Tata Motors BS6 commercial vehicle, which brings down the total cost of operations and at the same time offers better revenue-earning prospects.

From a historical perspective, the CV industry is cyclical with a set of peaks and troughs, and with the last and current fiscal seemingly lacklustre, the Indian CV industry will strive to surpass previous peaks on the back of robust economic recovery going ahead. This increase in demand for CVs in the next four to five years is also expected to have a ‘multiplier effect’ on the income and employment prospects of the entire extended value chain of auto components, service workshops, mechanics, dealers, spare parts distributors and retailers, transporters, drivers and labourers.

Published: Jan - Feb 2021 Issue | Motoring Trends

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