The chang­ing land­scape of CV in­dus­try

The changes vis­it­ing the In­dian CV in­dus­try are wor­thy of be­ing termed as rad­i­cal.

Commercial Vehicle - - CONTENTS - Story by: Collin Noronha

The changes vis­it­ing the In­dian CV in­dus­try are wor­thy of be­ing termed as rad­i­cal.

Nu­mer­ous an­nounce­ments and the roll-out of reg­u­la­tions mark the changes that con­tinue to visit the In­dian CV in­dus­try. Their na­ture makes them el­i­gi­ble of be­ing termed as ‘rad­i­cal’. A ‘Rad­i­cal Change’ is per­haps the best phrase to de­scribe what the com­mer­cial ve­hi­cle seg­ment in In­dia is cur­rently go­ing through. It may be dif­fi­cult to nail the ex­act place and time when it all started, the fact is, it did, and with enough thrust to trig­ger a ‘rad­i­cal’ change. Back­track­ing a bit, and the first trig­ger that comes to mind is the GST. The next that comes to mind is the pro­posal of ve­hi­cle scrap­page pol­icy. The sud­den shift from BSIII emis­sion norms to BSIV emis­sion norms took place last year. It was no less ‘rad­i­cal’. An­other ‘rad­i­cal’ change around the cor­ner is the shift to BSVI emis­sion norms. If the change vis­it­ing the CV in­dus­try will sub­side after the shift to

BSVI norms, the same does not seem to hold true. As the talk of reach­ing BSVI norms by skip­ping BSV norms gained promi­nence, the talk of go­ing elec­trc also picked up pace. It be­came clear, that the winds of change would not die down after the move to BSIV. They would work in not one, but many direc­tions in­stead. An ex­am­ple of that was the an­nounce­ment of new axle norms.

For the key stake­hold­ers of the CV in­dus­try, the ‘rad­i­cal’ change is in­flu­enc­ing the pur­chase of ve­hi­cles. Rather than be­ing planned, ve­hi­cle pur­chases are turn­ing into re­ac­tions. Medium and small fleet op­er­a­tors have de­vel­oped a fear that a new reg­u­la­tion will sud­denly turn their age­ing fleet il­le­gal, al­most overnight. They are com­ing to see that their profitabil­ity is at risk ev­ery day, and day after day. For them, the prime in­di­ca­tors for this are the fluc­tu­at­ing fuel prices and fall­ing con­trac­tual freight rates in some seg­ments due to the new axle norms. The me­chan­ics are slowly watch­ing their jobs dwin­dle. From car­ry­ing out sub­stan­tial re­pairs, they are now see­ing them­selves car­ry­ing out mi­nor re­pairs such as fluid changes and greas­ing. They are wait­ing for OEMs to em­power them. To train and in­cen­tivise them to ser­vice the modern CVs with an amount of elec­tron­ics on board. For OEMs, apart from fac­ing the com­pe­ti­tion in the mar­ket, there is an­other bat­tle to be fought. This in­cludes the need to in­cul­cate new tech­nolo­gies and meet not just the new, tighter emis­sion norms by opt­ing for Ex­haust Gas Re­cir­cu­la­tion (EGR) and Se­lec­tive Cat­a­lyst Re­duc­tion (SCR), but also to meet the new axle load­ing norms and var­i­ous other re­quire­ments that seem to spring up now and then. With the added stress on stay­ing rel­e­vant, the de­sign and prod­uct de­vel­op­ment teams at OEMs are busy. They are un­der un­re­lent­ing pres­sure to get the right com­bi­na­tion of prod­uct ca­pa­bil­ity and fea­tures. They are un­der pres­sure to get there be­fore the com­pe­ti­tion does.

One school of thought is that, there’s in­suf­fi­cient time avail­able for prod­uct test­ing and val­i­da­tion. This makes it risky in an in­creas­ingly com­pet­i­tive en­vi­ron­ment. An­other school of thought is that, the pres­sure be­ing ex­erted on de­sign and prod­uct de­vel­op­ment will cre­ate a sense of ur­gency. The sense of ur­gency would in-turn lead to greater in­ven­tions and dis­cov­er­ies. The de­vel­op­ment of tech­nol­ogy for BSVI and elec­tri­fi­ca­tion at In­dian costs for ex­am­ple. With the pos­si­bil­ity of one ar­ti­cle ad­dress­ing all the fac­tors of rad­i­cal change low, it could serve to look at two fac­tors – new axle norms and elec­tri­fi­ca­tion, that seem from the out­side to call OEMs to pull out all the stops to stay in the game. The new axle load norms are ex­pected to in­flu­ence up­ward seg­ment shifts start­ing at 14-tonnes (as per the old GVW rat­ing) and go­ing all the way up to the trac­tor trail­ers. Elec­tri­fi­ca­tion, at the other end, would most likely have an ini­tial im­pact in the lower ton­nage seg­ments. In pas­sen­ger car­riage rather than goods CVs.

New axle load norms

The an­nounce­ment of new axle load norms was thought to give fleets the free­dom to load their ex­ist­ing ve­hi­cles by up to 25 per cent more. This would amount to a great deal, and es­pe­cially in the wake of in­fla­tion­ary op­er­at­ing pres­sures in­volv­ing driver salaries, fuel prices and other chal­lenges (like driver

short­age and fuel pil­fer­age). In re­al­ity, the per­mis­si­ble pay­loads have in­creased. They have how­ever come at a price, and not just by the way of in­creased taxes, but also by the way of po­ten­tially higher fuel costs and higher tear and wear. In an al­ready trou­bled en­vi­ron­ment of ris­ing fuel prices and the risk of end-user com­pa­nies ne­go­ti­at­ing hard for re­duc­tions in con­trac­tual freight rates, a ma­jor­ity of fleets have come to see lit­tle or no ben­e­fit from the new norm, at least in the near term. Those that ser­vice the open mar­ket have bet­ter chances of mak­ing up for losses when freight sen­ti­ments are high. The con­tracted ser­vice providers will have to wait. They will have to set­tle for the com­fort of as­sured loads.

A mil­lion dol­lar ques­tion for OEMs is whether de­mand pat­terns will shift be­tween ton­nage seg­ments, and whether these changes will ad­vance or de­fer cus­tomer pur­chases. Shifts in de­mand pat­terns be­tween ton­nages are con­tin­gent on changes in prod­uct fea­tures such as load body di­men­sions, en­gine power and tyres. With the threat of fall­ing con­trac­tual freight rates it is quite likely that trans­porters ser­vic­ing con­tracts will be open to shift­ing to lower seg­ment ve­hi­cles with (the new) higher pay­loads. Stress will be on scor­ing bet­ter op­er­at­ing eco­nom­ics. The trend for seg­ments such as tankers, ce­ment bulk­ers and trail­ers could be very dif­fer­ent be­cause of a wider range of fac­tors de­ter­min­ing the ve­hi­cle re­quired for a route or for a par­tic­u­lar de­liv­ery pat­tern. While OEMs work on ba­sic up­grades across their prod­uct port­fo­lios, it is log­i­cal of them to keep an eye out for niche cus­tomer re­quire­ments. They are also cer­tain to keep an eye out for the trends that arise from changes that are ca­pa­ble of cre­at­ing a new play­ing field for OEMs.

Elec­tri­fi­ca­tion

Given the grow­ing con­cerns sur­round­ing pol­lu­tion, and un­pre­dictable fuel prices, there could be no other time than now to drive al­ter­nate fu­els, hy­bridi­s­a­tion and elec­tri­fi­ca­tion of CVs. The new axle norms, if any­thing, have fur­ther dis­tanced the prospect of elec­tri­fi­ca­tion of com­mer­cial ve­hi­cles for goods car­riage. From a prac­ti­cal stand point how­ever, the case for al­ter­nate fu­els, hy­bridi­s­a­tion and elec­tri­fi­ca­tion con­tin­ues to re­main stronger for CVs that carry peo­ple. For pas­sen­ger car­riage, the key re­straint for al­ter­nate fu­els con­tin­ues to be their dis­persed avail­abil­ity. De­spite cer­tain op­er­at­ing en­vi­ron­ments pro­vid­ing the at­mos­phere for the de­ploy­ment of hy­brids and full-elec­tric buses, cost con­tin­ues to be a com­mon re­straint. Other key re­straints in­clude the lack of charg­ing in­fra­struc­ture, safety and range anx­i­ety. The school, staff, and city route per­mit seg­ments (where the dis­tance per trip is short) make strong con­tenders for the de­ploy­ment of elec­tric buses. In seg­ments like in­ter-city, low util­i­sa­tion lev­els, sea­sonal trends, pres­sures on ticket fares be­cause of com­pe­ti­tion, and grow­ing af­ford­abil­ity as well as air travel con­nec­tiv­ity are neg­a­tively in­flu­enc­ing the de­mand for premium buses. The

pref­er­ence and af­ford­abil­ity of premium buses is go­ing down­hill. To talk about elec­tric and hy­brid buses in such a sce­nario would sim­ply be not worth it. Es­pe­cially when seg­ments like these are con­cerned.

Though at a nascent stage, there is no dearth of elec­tric buses to choose from. There are prod­ucts on of­fer from Tata Mo­tors, Ashok Ley­land, VECV, JBM Auto and Olec­tra. Growth of elec­tric buses, it is clear, will be driven by state and city trans­port units. This may be sub­ject to grants from the re­spec­tive state govern­ments and even the cen­tral govern­ment. The fact is, the state and city trans­port units have the most po­ten­tial to build a fleet of elec­tric ve­hi­cles by bear­ing the high cost of ac­qui­si­tion. It is they who have the most po­ten­tial to build a fleet of elec­tric ve­hi­cles by bear­ing the longer ROI. The de­ploy­ment of such buses will also al­low pri­vate fleet own­ers to wit­ness, ex­pe­ri­ence and warm up to the idea of elec­tric buses in their own fleets. This would amount to an es­ti­mated time span of four to five years. The adop­tion of elec­tric buses in other ap­pli­ca­tion seg­ments will have to wait un­til three crit­i­cal re­straints – cost of ac­qui­si­tion, fleet owner mind-set (aware­ness, un­der­stand­ing and ac­cep­tance of the tech­nol­ogy) and the lack of charg­ing in­fra­struc­ture, are ad­dressed. In­no­va­tive busi­ness mod­els for bet­ter rev­enue, util­i­sa­tion, shorter ROI, and lower cost of ac­qui­si­tion and own­er­ship could ex­pe­dite the elec­tri­fi­ca­tion of CVs in In­dia. Till then, the de­vel­op­ment will be slow and steady.

Collin Noronha is the Pro­gram Man­ager, Mo­bil­ity (Au­to­mo­tive & Trans­porta­tion) Prac­tice, Frost & Sul­li­van. The views ex­pressed by the au­thor are his per­sonal opin­ions and do not nec­es­sar­ily re­flect the view of CV mag­a­zine.

The new axle norms are ex­pected to in­flu­ence up­ward seg­ment shifts.

Fuel cost is the sin­gle largest bur­den on op­er­a­tional costs.

Op­er­at­ing eco­nom­ics are ex­pected to change dras­ti­cally by 2020.

Growth of elec­tric buses will be driven by state and city trans­port units.

Min­eral pric­ing and charg­ing in­fra­struc­ture fea­ture among key trends re­strain­ing EV adop­tion.

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