BW Communities

A Time For SCVs

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[There's a new friendship in the works. Commercial vehicle manufacturer Ashok Leyland, in collaboration with Nissan Motors Company, rolled out its first light commercial vehicle (LCV) -- Dost -- for the Indian market last week. More interesting was the sales target of 140,000 units set for the next three years by the JV partners. The joint venture - Ashok Leyland Nissan Vehicles - plans to bring out two more products by 2013 in addition to Ashok Leyland Dost, which is being manufactured at ALL's Hosur facility.  The bullish target set by a new entrant in this segment is an indication of the potential that the LCV market holds in a burgeoning economy. "Within the LCV segment, the SCVs (Small Commercial Vehicle) – i.e. vehicles of 3.5 gross vehicle weight and less – have posted a CAGR of 34 per cent over the past 5 years," says Dr V. Sumantran, Executive Vice Chairman, Hinduja Automotive Ltd and Chairman, Nissan Ashok Leyland Powertrain Ltd. Ashok Leyland's Dost, the 1.25-tonne payload capacity LCV, is entering a market which already has 3-4 established players like Tata Ace, Mahindra Maxximo and Genio, Force Motors' Trump 40 and Piaggio's Ape truk plus. <a href="/businessworld/system/files/graphic1-pu.jpg" target="_blank"><img src="/businessworld/system/files/graphic1-250x108.jpg" style="float: right; margin: 8px;" width="250" height="108"></a>The Dost – the pricing for which is yet to be disclosed and which wil be commercially launched in a month or so – will come in three versions – with the top-end one fitted with an air-conditioner and power steering. Though top-end version features suggest that Ashok Leyland Nissan Vehicles is positioning Dost as a passenger and goods carrier, sales numbers suggest that these vehicles are mainly preferred as goods carriers. According to the SIAM report, goods carriers in the LCV category registered sales growth of 27 per cent in the April–June quarter; passenger carriers in the same category reported a contraction of 5 per cent during the same period. "Penetration is low in the LCV market," says Kotak Securities analyst Hitesh Goel. "Especially in the sub-1 tonne category, there is a huge demand mainly from rural areas and small entrepreneurs." The growing success of the hub-and-spoke model with smaller vehicles having to make last mile deliveries, along with the robust growth of the retail sector and increased rural connectivity are contributing to the growth to the LCV segment, adds Dr Sumantran.  Goods transport vehicles are redefining the business. They are good for city transportation and for small and medium enterprises doing the milk-runs, says Society of Indian Automobile Manufacturers' (SIAM) Director Vishnu Mathur.   Dr Sumantran agrees saying smaller vehicles are used for last-mile deliveries of consumables like vegetables, fruits, drinking water, meat, or general goods, demand for which have always been on the rise as spending and consumption levels increase. <img src="/businessworld/system/files/graphic2-600x157.jpg" style="vertical-align: middle;" width="600" height="157"> According to SIAM sales report, the industry sold 97,778 LCVs during the current April–June period representing a growth of 22 per cent over the year-ago period. During the same period, sales of medium and heavy commercial vehicles (M&HCVs) grew only 5 per cent to 75,000 units over the year-ago period. Also, while costlier loans are affecting the sales of M&HCVs in an environment of tightened liquidity, sales of relatively low-cost LCVs are going strong. "The Indian SCV (small commercial vehicle) customer is fast evolving and becoming increasingly demanding. Apart from fuel efficiency and durability, other attributes like driveability, power, comfort, safety, loading capacity and even styling are important," Dr V. Sumantran said on the sidelines of the launch. Though the current market scenario is of ‘the more the merrier', what needs to be seen is how Ashok Leyland Dost positions itself in face of stiff competition to meet the kind of sales target it has set up.