Foreign automakers struggle on commercial vehicle route

Truck maker MAN, part of the Volkswagen group, decided to shut its India shop last month after 12 years of operations. In June this year, Swedish commercial vehicle maker Scan ia decided to stop producing luxury buses in India. American truck maker Na vi star exited India by walking out of a joint venture( JV) with Ma hind ra and Ma hind ra (M& M) about five years ago.

In a country where foreign brands control the lion’ s share of the car market and over one-third of the two-wheeler market ,90 percent of the medium and heavy commercial vehicle( M& H CV) market is dominated by domestic players.

Home-grown brands such as Tat a Motors, Ashok Leyland, and M& M together dominate the truck as well as the bus market. The Indian CV market, experts say, is tough and bar ring a few exceptions not many have managed to get the success formula right.

Let us look at the numbers: Of the 35,649 units of medium and heavy buses sold in 2017-18, three Indian players— Tata Motors, Ash ok Leyland, and M& M—accounted for 80 percent.

VECV, a JV between Swedish player Volvo and India’s Eicher Motor had about 13 percent share, while S ML Isuzu( promoted by Japan’ s Sum ito mo Corporation and Isuzu Motors) had a 7 percent share. In the medium and heavy truck space, the Indian trio accounted for 88 percent of last year’ s domestic volume of 304,664 units, according to the Society of Indian Automobile Manufactures data.

The data excludes the volume of Daimler, which has seen some degree of success in India. Players like MAN and Scan ian ever made their sales numbers public.

R av indra Pi sh ar ody, who served as executive director of Tat a Motors’ CV division, until mid -2017, said the Indian companies had prepared well as they had anticipated the arrival of the multinational company brands .“The products and features offered by the Indian brands are not lacking in any way compared to offers of multinational brands. The foreign entrants have not been able to offer anything superior despite initial claims ,” he added.

The appeal of a foreign brand is much lower in the case of C Vs while being significantly higher in cars .“The Indian companies have over the years built a strong relationship with customers, and continue to do so. Thus, customers have not found any compelling reason to move away from brands that have supported them over the years. Thereisa well-established resale price for used trucks of leading Indian players, while there sale prices of M NC brands are yet to settle ,” said Pisharody. Korean car maker Hyundai, which is the second-largest player in the domestic car market, was evaluating an entry into the Indian CV space but has not yet been able to firm up its plans. It sell sM& H CV as well as light CV sin markets like Korea and China. The management of MAN decided to sell its Pi th amp ur truck-manufacturing unit to the Firo di as-promoted Force Motors. Erich Nesselhauf, managing director and chief executive officer, Daimler India Commercial Vehicles, said India was “definitely” a tough market. “The sheer size of the country, coupled with its regional diversity is demanding, especially in terms of the sales and service network. Another challenge is the regulatory framework, which is developing in the right direction, but often in an unpredictable manner. And there is a variety of relevant norms and administrative procedures on state levels, which can be cumber some,” Nesselhauf said. The subsidiary of the German auto major sold about 16,700 trucks in India last calendar year.

That gives the company a share of about 5 per cent, making it the most successful foreign brand in the domestic truck market. Nesselhauf said the strategy of having a high localisation of over 90 per cent paid off. “We worked extremely hard to understand every detail of this unique market. And we invested heavily in training, both of our own team and of our suppliers, to be able to deliver quality according to global standards”.

Pisharody said there is no magic formula to crack the domestic truck market. “Customers need to see more value in the foreign brands. But there is a limited success so far,” he added.

Bal Malkit Singh, promoter of Mumbai-headquartered Bal Roadlines, which has a fleet of over 400 trucks, said the beauty of a Tata or Ashok Leyland truck is that it can be repaired by any roadside mechanic.

“Both the brands have a nationwide network set up over several decades. The MNCs cannot compete with them on vehicle cost as well as the cost of service and spares”. Singh said such exits drive more customers towards the domestic brands for whom the Indian market is the primary focus. “I have four-five MAN trucks that are a year old. I don’t think I will find a buyer when I will step out to sell them after threefour years”.