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GDP growth
Robust Economic Growth Projections : 8% to 9% - Short to Medium Term
2011 1066396
2012(e) 1154796
2013(e) 1250338
2014(e) 1353632
2015(e) 1465288
10.3
775.5
7.9
825.7
8.3
882.7
8.3
943.8
8.3
1079.4
8.2
1154.5
Healthy mix with rapid growth - both in Industry and Service Sectors - helping Commercial Vehicles Business Expansion Substantially
As per 2010 Datamonitor estimates, nearly 70.2% of the Indian population live in rural areas and 29.8% live in urban areas.
Increasing share of Road Transportation due to road infrastructure development and evolving hub and spoke model
PEST Analysis
Increased Infrastructure spending Stringent emission norms & safety regulations Increased income will increase freight movements Costlier finance High material cost, high production cost
Political Technolo
gical
Economic Social
Constant upgradation required to keep up with competitors Emission control tech. to meet norms
Key Challenges
Increasing Customization & Application Proliferation
Operating Cost Pressures Increased Customer awareness Accelerated Technology upgradation requirements & other Change needs
Cyclicality of businesses
Key Challenges
Increased Customer awareness
The Global CV markets has developed in 4 Market distinct stages High level of regulation
Market Poor infrastructure (Roads) Rampant Overloading Customers Fragmented & Uninformed Purchase decision by price Products Dominance by MCVs (65%) Tonnage range - Few models Rugged, low tech, standardized vehicles Emission norms: Euro I & II Manufacturers Few strong local manufacturers Market Road infrastructure dev. Reduced overloading Customers Increased awareness Purchase decision more by life cycle cost Products MCVs (35%) to HCVs Shift Explosive increase in LCVs Emergence of special applications vehicles Premium CVs grow (20%) Emission norms: Euro I & II Manufacturers Entry of foreign OEMs manufacturers Market Customized vehicles Requirement Growth in product plus offerings Customers Increasing sophistication Emergence of consolidation Products MCVs diminishes (10%) Technology convergence of low end & premium products Largest share of haulage (60%) by HCVs, mainly TTs Proliferation in LCVs Emission norms: Euro III Manufacturers Dominance of foreign OEMs Domination by 3PL provider Transport solution package Customers Highly sophisticated Purchase decision purely by life cycle cost and profit High level of consolidation Products Sophisticated technology Shrinking product life cycle High Utilization High level of electronics Car derived LCVs Emission norms: Euro IV Manufacturers Consolidation of players
We clearly see Indian market moving towards Stage 2 and 3 simultaneously and going forward, it is likely to follow the evolutionary path, albeit at an accelerated pace
Engineering Challenges to Address Current & Introduce advance products and Future Business needs
Business
Focused products for varied customer application and performance needs Robust/ Rugged vehicles to address target markets & terrains Application proliferation with modularity, commonization and rationalization Flexible Capacity ramp up for faster response
Strategy
Customer / Market Segments
features @ no or minimal cost impact Improve fuel efficiency & driveline performance Develop Alternative Fuel Vehicles Meet Stiffer Regulations emission, safety and noise Use of alternative material Improve Reliability & Durability
Rapid development & cost effective introduction of new products Flexibility Design/ Development/ Manufacturing/ Distribution Optimized Outsourcing
Trends so far
The proliferation of the hub-nspoke model, improving last mile connectivity and last but not the least the strong demand originating from rural segment is likely to drive demand in the LCV segment over the medium term.
It has in fact been one of the strongest growing segments in the entire automobile space during the current year, registering a growth of 29.3% YTD Nov 2011. The SCV segment within LCVs which accounts for over 3/4th of the LCV market is driving growth on back of strong demand for transportation of consumer goods within cities, replacement demand from upper-end three wheelers and healthy viability offered to FTUs.
Future forecast
We maintain our long-term growth outlook for M&HCV with a CAGR (%) of 9.5-11.5% and for LCV with CAGR of 11-13% over the next five years We expect the LCV segment to grow by 17-18% in FY12 on YoY basis despite rising interest rates for CV financing In the sub 1t segment, passenger variants have also been successful, replacing the clumsy upper-end three wheelers, which traditionally cater to traffic in outskirts of cities.