Multi-pronged approach to maintain growth momentum
Meritor India is on a roll. The company is riding the growth wave in the CV industry, recording highly impressive growth figures during the last financial year as a result. With the upswing in the CV segment expected to continue, Meritor is bullish about its prospects.
We find out details from Mr. N.P. Thimmaiah, Managing Director and CEO, Meritor India.
Excerpts:
How was FY18 for your company? What were the major highlights of your performance during the year?
Last year had been an outstanding one for Meritor in terms of revenue performance and growth. We were able to grow our revenue by more than 25% YOY. This growth was fuelled majorly by the strong demand from the CV industry, our new product launches, increase in share of business with customers and efficient operational performance. Our commitment to meet customer expectations in terms of quality, delivery and new product development is what is enabling us to achieve this kind of steady growth year after year.
Two significant highlights of last year are the launch of slipper type suspension for medium duty trucks of 25T to 37T capacity used in line haul applications and a new state-of-the-art R&D facility being built in our Mysore facility to expand our current end-to-end validation capabilities in India.
What impact did the BS-III ban and GST implementation have on your company and on the CV sector as a whole?
The reformative GST, which replaced the then existing taxation system in July last year, was a welcome move for the transport and logistics industry. It is altering the way in which the supply chain and warehousing industries were operating. Transportation of parts to customers at various locations across the country has been positively affected as the waiting periods at State and city borders have been eliminated to a large extent. Though there were initial teething issues during implementation, long-term outcomes of this new tax regime are expected to be highly beneficial.
Talking about the BS-III to BS-IV transition, though most CV manufacturers had started preparing well in advance, the sudden stoppage of sales from April 2018 put a lot of strain in the system.
This transition led to CV sales hitting almost the lowest in almost seven years in the first quarter of FY17. A host of factors, including pre-buy in the previous quarter, conversion of unsold BS-III inventory into BS-IV (wherever possible) and other applications, resultant price hike (compared to BS-III vehicles), components shortage for BS-IV vehicles, etc., affected the production and sales largely.
This overall slump in market demand naturally affected our business as well. But it was quickly compensated by the increasing demand in the following three quarters of the year.
What would you attribute the CV sector’s robust growth to? Please list out the top three growth drivers.
The CV sector is witnessing a strong growth owing to a multitude of factors like increased investment in infrastructure development, improved industrial activities, improving rural economy, etc. This, coupled with other factors like lower interest rates and strong GDP growth in the economy, is also boosting sales. Growth in the M&HCV sector is due to expanding mining activities leading to increased demand for higher tonnage vehicles, higher demand from increased infrastructure and construction activities, and strict enforcement of overloading restrictions in States like UP, Rajasthan, Madhya Pradesh, etc. The LCV sector growth is fuelled by stronger adoption of vehicle financing, new product launches, and hub & spoke business models (like that of e-commerce) requiring last-mile connectivity in delivery of goods.
How do you see the current year unfolding? What do you think would drive growth this year, both for the market and for your company? What are your plans / targets for the year?
M&HCV production is at peak and the trend is expected to continue for the near future. BS-VI implementation from April 2020 is expected to drive pre-buy in FY19 and also replacement led demand caused by implementation of the vehicle scrapping policy which aims to take out 20+ year old vehicles off the road.
We now see clear signs of the hub & spoke business model emerging, significant growth in higher tonnage haulage vehicles and simultaneous shrinkage in the medium duty market. This change will drive the overall pattern in the industry and drive growth of multi-axle vehicles.
All major OEMs are working on new product platforms and e-mobility solutions. We at Meritor are confident that this strong market demand and the new product launches in the line would help us keep up the growth momentum. Significant capacity ramp-up activity work is on to cater to the increasing demand requirements, and we are also working towards increasing our share penetration with customers. In addition, we are also strengthening our supply base in line with our expansion plans. Our new product launches which are underway are aimed at customers gaining the best-in-class performance advantage with our products in their CVs. This we believe will be made possible by our philosophy of working closely not only with customers but also with end users to ensure that our product and service offerings exceed their expectations in terms of performance, features and quality.
We are also developing a solution called eAxle to support the e-mobility requirement of the market. The prototype is under development and soon the same will be ready for testing on Indian roads.