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New Era for India's CV Landscape

Innovative new trends are set to shape the future of the commercial vehicles industry in the near future

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Covid-19 brought the world to a grinding halt, paralyzing businesses and forcing them to reckon with unique problems. Meanwhile, the Indian commercial vehicles (CV) market was already battling a slew of challenges like a tapering down of overall economic growth, increased axle load norms in the Medium and Heavy Commercial Vehicle (M&HCV) segment, and smooth facilitation of the BS4 to BS6 transition. The pandemic aggravated these challenges, resulting in unprecedented levels of de-growth across the industry and the economy at large.

On the upside, the crisis offered an opportunity for the industry to reimagine business processes by leaning on new emerging technologies and business opportunities arising out of the situation. This has paved the way for innovative trends - trends that are all set to shape the future of India's CV landscape.  

The first few strides Given the substantial reductions in the movement of vehicles, the possibilities of any discernible improvement in the CV industry was bleak initially. However, as global economies gear up to safely resume commute and transportation in the new normal, the CV industry is expected to break free of the pandemic's economic repercussions. In fact, the market's progress through September and October 2020 is clearly indicative of a resurgence of the CV business in a post-Covid world.

Last-mile applications such as FMCG, agricultural produce, milk, and supplies of e-commerce, have pushed the growth for small commercial vehicles (SCVs), and intermediate and light commercial vehicles (I&LCVs) during the lockdown. And as online shopping becomes a mainstream by-product of social distancing compliance, new transportation norms will extrapolate the growth for I&LCVs used for intercity transport. In the M&HCV segment, the government impetus to build infrastructure including roads, ports, bridges, and tunnels along with the focused drive to increase the mining of coal, has seen strong demand for tippers and tipper trucks. Strong demand for iron ore has also helped increase the demand.

On the cargo front, the e-commerce boom has only been further strengthened with the pandemic forcing more and more people to get into online shopping. A few other segments like pharma, petroleum, oil, and lubricants have also contributed to the recovery of demand for M&HCV vehicles. For those who wish to step out with caution, CV passenger segment numbers can be expected to pick up once there is sufficient awareness among the general public about safe traveling in the new normal.

Rallying on this optimistic outlook, the CV industry may also witness a new surge in utility once the much-anticipated Covid-19 vaccines are released in the market. Transporting millions of doses across the country could spur the demand for CVs for specialized reefer trucks and 'fast track' sector recovery.  

The telematics management system is one of the most crucial innovations that promises myriad valuable benefits. It generates rich fleet insights and offers specific interventions towards improvement in utilization. It further offers improved overall driver efficiency, ensures the safety of the truck and the driver, monitors vehicle diagnostics remotely and real-time preempts breakdowns, prolongs the vehicle's life by monitoring vehicle health and driving behaviors, and improves working conditions and business productivity.

With its greater emphasis on usability, telematics promises to play a crucial role in helping shape the future of the Indian trucking and logistics industry. Consequently, Tata Motors was the first Indian manufacturer to incorporate the telematics system in their vehicles almost eight years ago. Today, the new Tata Fleet Edge telematics system is a capable system and can be equipped to ensure that our customers are able to enhance their vehicle utilization while managing their fleet and operational costs, thereby improving their profitability.

The logistics costs in India are still high. Telematics will offer one of the biggest opportunities to cut inefficiencies and hence, costs of transportation. This will benefit the whole transport industry and the entire economy by bringing down logistics costs.  

As the climate and environmental concerns gain an increasing degree of significance, the CV market is also working in earnest to meet global norms and government standards by offering technological advancements that enable lower TCO (Total Cost of Ownership), improved earning potential, enhanced comfort, connectivity, and performance, among other attributes.

These new emission standards have influenced the CV market significantly, and Tata Motors has not only aimed for cleaner vehicles but also redesigned and revamped its entire product range based on customer requirements.

As freight availability improves in the backdrop of a slowly, but surely, recovering economy, the CV industry is expected to have a better second half in FY21. The government is expected to notify the scrappage policy, which is likely to be a win-win situation for all stakeholders involved, as it will not only lead to replacement demand but also lower overall emissions considerably, by replacing old polluting vehicles with new ones, which meet the much stringent BS6 emission standards. Government initiatives like the National Infrastructure Pipeline with over 6,500 infra projects amounting to over Rs 110 lakh crore, spanning till 2025 will bud a new demand for CVs across categories to support the massive volume of projects in the energy, water sanitization, commercial infra, and communication sectors.

Schemes such as Performance-linked incentives (PLI) will fuel growth in the manufacturing sector; direct benefits of which will accrue to the industry from roughly Rs. 57,000 crore outlay designated for the automobile sector. Once the subsequent impact of this scheme boosts exports, indirect benefits should also trickle in as the other sectors benefitting from the scheme scale up production. This will create demand for CVs used in the transportation of raw materials and finished goods. 

The CV industry has typically followed a cycle of five to seven years with about three to five years of growth followed by a decline of one to two years. The recent decline in demand for CVs has seen an extended period of a little more than two years and as expected, we are beginning to see a revival in the demand. The increase in demand for CVs in the next few years will have a 'multiplier effect' on the income and employment prospects of the entire extended value chain. Therefore, it would be fair to anticipate that the CV industry will create a fresh waves of jobs across the industrial spectrum, thereby supporting the lives and livelihoods of millions attached to the ecosystem.  

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Girish Wagh

The author is President, Commercial Vehicle Business Unit, Tata Motors

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