With the Indian commercial vehicle industry clearly back on track, the one player who has been investing heavily and doing a lot of homework over the last three to four years is ready to set new standards in the market. VE Commercial Vehicles, the Volvo-Eicher joint venture company, is all set to give a massive push to the heavy-duty (HD) truck segment (16 ton and above) this year, mainly driven by its new Pro series range, to complement its existing stronghold in the light- and medium-duty (LMD) segment. We visited the company’s corporate office at Gurgaon to meet Mr. Vinod Aggarwal, CEO, VE Commercial Vehicles, for some exclusive updates.
The heavy-duty truck segment seems to have recovered well from the slowdown, growing by 62 per cent in Q4 2014 and 39 per cent in Q1 2015. At the forefront of the market recovery are multi-axle vehicles and tractors while the mining tipper segment is yet to recover fully. Says Mr. Aggarwal: “The overall slide in the commercial vehicle industry has stopped and we now expect it to start doing well. The heavy-duty truck segment has been the first to recover since the large fleet operators were able to anticipate the turnaround faster than others and also because the heavy-duty segment depends on core industries like coal, iron-ore and steel which are showing signs of growth. We expect the growth to extend into the light- and medium-duty segments as well soon.”
VE Commercial Vehicles has a dominant presence in LMD trucks with a market share of around 32.2 per cent. It is all but natural that the company is planning to focus on the HD segment where it currently has a share of less than five per cent. Mr. Aggarwal explains: “We have a market share of 3.5 to 4 per cent in the HD segment and haven’t still quite reached the take-off point. HD will clearly be our growth-driver moving forward, because we see maximum potential in this space as the numbers indicate. The Indian HD truck market’s size was around 241,000 units in 2011, and though it fell to nearly 155,000 units in 2014, it is likely to go back to its initial peak in around two years’ time. The LMD segment, in which we have around one-third share, currently contributes only one-fourth of the country’s total 5-ton and above truck market. For our future growth, we have to increase our share in the HD segment, so our future and potential for growth is clearly on HD. In the medium- to long-term, we are looking at a sizeable share of around 10 to 15 per cent in the HD segment and are targeting step by step target growth in coming years.”
Since January 2014, VE Commercial Vehicles has been on a massive phased market launch campaign for its Pro series range of trucks and buses which is now doing the talking in the market. While the Pro 1000 and 3000 series have already been made available across the country, the Pro 6000 and 8000 series are being launched as per a well-worked-out strategy.
“The overall market response for the Pro series range has been outstanding. The Pro 1000 series has almost replaced our existing range and the Pro 3000 is available in the premium segment of medium duty trucks. We have started selling the Pro 6000 for select applications like market load, cement, industrial goods, chemical tankers, parcel etc. The Pro 6000 series is being sold only in select markets because we want to give the products only to relevant customers who can understand the real value proposition of the vehicles through features like faster turnaround time, superior cabin comfort, reduced driver fatigue, better efficiency and other advantages of our products”, he shares. The Pro series vehicles boast of a fuel efficiency advantage of around 7 to 10 per cent and turnaround time advantage of 10 per cent over competition which could be a real game-changer in the industry.
Knowing that having the right products is only half the puzzle solved, VE Commercial Vehicles has also upgraded its capabilities with regard to other critical aspects such as market penetration and aftersales support. The company has evolved a lot through synergies derived from the Volvo-Eicher partnership and expects the growth to continue.
Asked for three key strengths of VE Commercial Vehicles in the market, Mr. Aggarwal observes: “Our primary and foremost strength is the new product range that we have developed – the Pro series range. Next in line are our sales and aftersales processes. We are increasingly becoming more customer-focused so that our customers in turn realize the benefits of working with us. We are simultaneously improving our parts availability and response time to service calls to support our Eicher On-Road service scheme. We have added adequate infrastructure such as service vans and on-site support as well for larger customers, especially in segments like tippers. The third key strength will be our penetration and reach through our dealerships where we are trying to reach our products to smaller cities and towns. We currently have around 275 3S and 2S dealerships and continue to add more each year.”
While growing in the market is important, being profitable is equally important, and if there has to be a perfect example of profitable growth in the trucking industry, it would be VE Commercial Vehicles. The company has maintained healthy profits throughout its journey, and the fact that it is currently debt-free is a significant achievement, given the recent market conditions and the kind of investments it has made in the last few years.
“We have adopted Volvo Group technology and that along with our frugal engineering capabilities has enabled us develop our trucks at the right price point. Our profitability is due to a combination of factors – lean structures and lean manufacturing operations, efficiency in buying, cost reduction jointly implemented with our suppliers, price management and so on. Which is why we continue to be debt-free with all our investments, close to Rs. 2,300 crore till last year, made from our internal accruals.” he points out.
On the bus front, VE Commercial Vehicles had closed last year with a share of 14.9 per cent share in buses. In the past, the company bagged orders for larger buses from STUs in Andhra Pradesh, Gujarat and Rajasthan and is working on some new developments in the space. It currently produces around 350 bus bodies per month at its bus plant at Dhar near Indore which has an annual capacity of 7,500 buses, while operating in single shift and is complimented with around 400 bus bodies outsourced from its vendors. The company has also recently launched its Skyline Pro series buses which comply to the new bus body code regulations and has already started supplies to customers as well.
VE Commercial Vehicles’ exports are going strong too, having exported 5,824 trucks and buses last year. The company’s key export market is South Asia while there is growing focus on regions like Middle East, South Africa and other parts of South East Asia.
Overall, the broad picture is quite clear. VE Commercial vehicles has positioned itself in perhaps the most advantageous position in the market at present. With a complete new range of vehicles from 5 to 49 ton and sufficient capacities in place, built on a solid foundation of globally proven processes in aftersales, product development, sales, quality management and manufacturing adopted from the Volvo Group, the company is fully equipped with both hardware and software facilities and is ready to take on competition.