| About Us - Registration/Login - Contact Us - Message Board - Glossary - Features - B-School - Legal - Biz-End - Orange-GTM - WAP |
| STOCK MARKETS | COMPANIES | SECTORS | ECONOMY | MUTUAL FUNDS | ONLINE TRADING | INVESTOR POINTS |
| |
|
| 'This site is a must read for investors ..' Forbes magazine | |
| India Infoline Sector Reports | Sat, 17-Jan-2004 12:00:35 IST (GMT+5:30) | |
| Automobile - LCV/ HCV | ||
|
 |
Demand Both passenger carrier (bus) and goods carrier segments have a predominant customer segment each. The passenger segment derives its major portion of sales from STUs (approximately 80%) and private bus operators. But for goods carrier major portion of sales is from fleet operators and transport companies (approximately 80%) and the rest from government institution and private bodies. The total demand for CVs comprises both private as well as the public sectors. Since 80% of CV's are purchased on credit, the availability of credit is a major factor influencing demand. The credit squeeze affects the demand negatively. For example, the demand dropped in 1983, 1991 and 1998 mainly for this reason. The cost of credit affects the operating margins of transport operators, by way of raising the break-even point of fleet operations. The other important factors influencing demand of CV are depreciation norms, diesel prices and changes in the Motor Vehicle Act. As most of the CVs are purchased by corporate entities (institutions, companies, partnerships etc) the depreciation norms provide tax shelter and affect the purchase of CVs. The availability and price of diesel plays a key role in operating profits of the vehicles about 45% of the cost goes towards buying the fuel. An increase in diesel prices causes imbalance in economics of fleet operators as they will not be able to pass on the increase in cost to end-users. Market expansion for freight availability for trucks is largely a function of economic growth and shortfall in railway's haulage capacity. The increase in economic activity helps in increased freight availability and hence has a positive impact on demand for CVs. Over and above the shortage in competent mode of transport, railways help the road traffic to increase freight movement through CVs and in turn increase demand for new trucks. Demand for buses is largely dependent on allocation of state budgets as almost 90% of the buses are purchased by the state transport undertakings. Thus, the State budget allocation for purchase of new buses by state transport plays a key role in demand for buses. Trend In CV Sales
Source : SIAM The demand for CVs has exceptionally mixed trend on account fluctuating M&HCV and the LCV sales, which have not been moving in tandem with each other. As indicated in the table above, the industry has seen a wide fluctuation in sales volumes over the past decade. The sales for CVs has increased from 131,668 in FY91 to 171,319 vehicles in FY2000 at a CAGR of 3%.After posting a positive growth in FY91 and FY92, the segment witnessed a downturn in FY93 mainly due to a credit squeeze, but bounced back in late FY94 to record a y-o-y growth of 32% in FY95. After high double digit growths in the years FY94, FY95 and FY96, cyclicality again raised its head and from H2 FY97 onwards, the sales of CVs started dwindling, leading to a drop of 33%yoy in FY98. This downtrend continued well into FY99. However, things bounced back in FY2000 with sales recording a growth of 22.4%yoy.The demand in FY2001 fell by 12.2% due to overall economic sluggishness. During FY2001, the overall demand dropped as the M&HCV segment recorded a 21.3% decline in sales though the LCV segment grew by 4.5% y-o-y. In the half year ending 2001-02 , the M&HCV sales increased by 20.7% y-o-y and the LCV sales dropped by 10.5% y-o-y. Trend In M & HCV Sales
Source : SIAM It is interesting to note why sales of HCVs have shown a trend as they have in the last nine to ten years. The so-called boom period from FY94 to FY96 was due to the fact that incremental freight movement passed on to the roads as the railways hardly added any tonnage during those years. This bias towards road traffic was also due to lower diesel prices, which constitutes around 45% of total operating costs of a truck. Opposed to this had been the rise in railway freight rates by around 8% annually. This growth trend started reversing in late FY97 when commodities like coal and steel started being imported from abroad in a liberalized economic environment. Imported coal costed 8 to 25% less than local coal and many coal based industrial consumers switched to imported coal resulting in reduced intra-country movement of these commodities. Secondly, relocation of industries close to the market also caused lesser movement in freight traffic. Thirdly, the downtrend was a result of demand-supply mismatch in freight (tonnage-km) in the country. An excess freight capacity was built up in the economy due to heavy addition of vehicles from FY93 to FY97. But with a drop in freight availability in the country, due to a slow-down in domestic production and exports, it lead to lower utilization of existing vehicles by fleet operators. But with an intention to improve fleet usage, operators started quoting lower freight rates, which reached its bottom in mid 1998. As fleet operators were unable to use the existing fleet optimally, there were no plans to add new vehicles to the fleet. Even an attempt made by CV manufacturers to provide heavy discount and low financing rates didn't induce operators to opt for addition of vehicles. But with improvement in freight rates by 20% since the bottoming out in mid 1998, the operating margins of fleet operators improved. The freight availability improved as a result of an increase in agricultural production in the country. Conditions improved during FY99 as the government undertook steps, to increase investment in infrastructure projects. This has affected an increase in freight availability in the country, which in turn improved usage of fleet by operators and boosted the confidence to go for new CVs. The lower interest rates and easy credit availability assisted an increase in demand for CVs.In FY2000, with a strong revival in the economy, which grew at 8%, sales of CVs posted a rise of 22.4%yoy in volumes. The growth in M& HCVs segment is largely dependent on the infrastructure sector and the recent (FY01) budget looks to be a favorable one for this segment as various plans have been announced for the development of infrastructure across the country. The focus has been on highway development projects, which includes the Rs600,000 mn National Highway Development Project ( NHDP). The GOI has also kicked off mega projects like Rs4,000 mn ‘ golden quadrilateral ‘ linking the four metros in India. This in turn is expected to have a positive effect on commercial vehicle sales for FY01, provided it is supported by a favorable monsoon and a resultant good agricultural harvest. This could be attributed to the drought like conditions in certain parts of the country like Gujarat, Rajasthan and Madhya Pradesh coupled with the recent hike in sales tax. The quantitative restrictions on the second hand cars have been abolished in the union budget 2001-02. The basic customs duty on the import of second hand cars has been raised to 105% with a peak rate at 35% and a similar duty has been imposed on the import of old multi-utility vehicles. There is a strong correlation between the sales of CVS and the GDP growth on a macro-level and a significant contribution on the micro level. Trend In LCV Sales
Source : SIAM LCV sales also seem to follow that of M&HCVs albeit with a time lag. They rose from FY94 and reached a peak in FY96 when HCV sales had started decelerating since then. In FY2000, too, when the M&HCV segment witnessed growth, LCV sales came down. However the LCV sales have grown by marginal 4.5% y-o-y in FY2001 and are expected to garner higher sales growth in the future, as short distance transport will grow at a higher rate than long distance haul. New Models A host of new models were introduced in FY2001 in the trucks, bus and MUV segment . The Indian market is for low priced rugged vehicles, which Indian manufacturers have developed indigenously. The industry has high entry barriers like well spread distribution network, service centers, after sales network etc. But with enormous potential in the country new players have started making a dent in the sector. Ashok Leyland launched the CNG buses and a few models in the defence sector like light-recovery vehicles etc . It launched several models in FY2001 and during the current fiscal 2001—02 viz ; the Cargo –759 in MUVs, Tusker Super and Bison Tipper in trucks, the Viking and the Cheetah in the bus segments respectively.Ashok Leyland vehicles have better fuel efficiency, maneuverability and pulling power compared to competitor models, but have disadvantages like lesser resale value and higher price compared to similar competitor models. In June 1998, Volvo introduced a 40 ton GVW tractor-trailer FH-12 in India. The company has set up production base for 4,000 vehicles at Rs3bn near Hoskote, Bangalore with initial indigenisation level of 40%. Recently a 24 ton, FM-7 tractor-trailer was also launched. Daewoo Motors plans to enter the bus segment in FY2000 by offering 6 ton GVW vehicle fitted with four cylinder turbo-charged diesel engine. The initial capacity will be about 15,000 vehicles. The diesel engines will be imported from Daewoo Avia plant in Czechoslovakia as volumes are not big enough to set up production base for engine assembly. It also intends to set up a parallel dealership chain to sell its buses in the country. Telco the largest player in the H&MCV segment introduced the LPT and SFC range of trucks in the 3-19 tonne range. Eicher Motors is all set to break the TELCO domination in the MUV segment . It recently launched the Skyline range of buses and trucks in the range of 3-9 tones. Tatra Udyog has entered the higher GVW segment in 1998 in collaboration with Bharat Earth Movers Ltd. It supplies to niche markets like dumpers and special vehicles used in large infrastructure projects and defense supply. The other player M&M has launched the Cabking 576 in the 3-tonne range whereas Bajaj Tempo Ltd.has launched the Station Wagon and Minibus in the MUV segment. The entry of new players will improve the technology of vehicles and force the existing players to introduce technologically superior vehicles. Though the new technology is at hefty premium, the manufacturers claim that it reduces the operating cost of the vehicle i.e. Rupees per km running of vehicle. The fiscal 2001-02 witnessed power, comfort and features as the driving forces with Telco, Ashok Leyland and Swedish major Volvo , rolling out new and advanced models. The multi-axle models have shifted the customer preferences though being highly-priced.
|
|
|
| 5PAISA | PREMIUM CONTENT | ADVERTISE WITH US | FEEDBACK | DISCLAIMER | PRIVACY POLICY | JOBS | FAQS | SITE MAP | HELP |
