Commercial Vehicle Industry in India

The Indian Automotive industry is one of the largest in the world. It accounts for 45% of the country's manufacturing
gross domestic product and 7.1 % of the country's overall GDP. The automobile industry employs about 19 mn people
directly and indirectly. India is the 8th largest commercial vehicle manufacturer in the world. While it is the 2nd largest
bus manufacturer, it ranks 5th globally in manufacturing heavy trucks.

After three years of decline, domestic commercial vehicle sales revived in

2016.
Healthy outlook on economic growth, subdued interest rates, government's
strong focus on infrastructure development, defence sector and urban
infrastructure (JNNURM, Smart Cities etc), increased freight movement due
to the expected increase in activity in sectors such as agriculture, e-
commerce, mining etc greater thrust of CV manufacturers on expanding
global footprint will be the key factors that will drive growth and expansion
of the CV industry in the coming years.

No of listed players (large Units/small units): Tata motors, Mahindra and Mahindra , Ashok Leyland, Eicher motors,
Hindustan motors, Force motors, Swaraj mazda , Bajaj Auto, Maruti Suzuki
 ➢ Evolution of Hub & Spoke Models – The supply
chain network will be redesigned with the
objective of ensuring proximity to
manufacturing locations and consumption
centers.
➢ A ban on overloading by the Supreme Court
➢ Low oil prices

➢ Viability of Electrical vehicles in the country

➢ BS VI migration
➢ Increased costs
➢ Financing issues
➢ Many companies try to de-risk their business by
venturing into other sister areas like defence and
exports. This strategy like any other is also fraught
with risks and can improve the business situation
only marginally.
➢ European CV makers capturing the industry
 Market outlook
• Sales of medium and heavy commercial vehicles (MHCV) in 2018-19 are expected to grow 16% over a high base
• Awarding of contracts by the National Highways Authority of India, the nodal agency for road construction, rose
70% to around 7,400 km in 2018, much of which will come up for execution in 2019. The government also
planned to expedite all road construction by December 2018.
• With construction being highly labour intensive, the government is expected to push construction projects in
the pre election year.
• The government is likely to focus on major river linking projects in its irrigation thrust and housing construction
under Pradhan Mantri Awas Yojna; These schemes will also boost demand for CVs.
• Expected improvement in GDP growth after lingering impacts of demonetisation and GST implementation
dissipate. Industrial GDP is expected to increase by 6.8% in fiscal 2019 as against a 5.5% growth in fiscal 2018.
• Input tax credit available on purchase of trucks incentivizing CV purchases by LFOs
• Prevalent overloading practiced by transporters to nullify the impact of axle norm. Higher tonnage MAVs are likely to
be more desirable than T-Trailers post the implementation of the norm leading to some shift in demand.
• CRISIL Research expects LCV goods sales to grow at 22% on-year in fiscal 2019 aided by higher replacement demand
supplemented by improved private. Higher infrastructure spend in the rural areas, too, is expected to aid demand.
• Bus demand is likely to see 11% growth aided by a revival in most of the end-use sectors (especially private stage
carriage, tourist, and schools) over a low base of fiscal 2018.
 TATA Motors- Equity Research Report
CV business

CMP: 171.15 market cap: 553.23 bn (52-wk high: 443.50 ; 52-wk low: 154.65)
• The CV is dominated by TATA Motors with 46.5% market share
• Global sales of all Commercial Vehicles (CV) were 4,56,552 vehicles
in 2017-18
• The CV market after a turbulent start in the year 2017, as a result of
announcement of BS-III to BS-IV changeover and concerns over
Goods and Services Tax (GST), recovered strongly representing a
growth of 21.7% in Fiscal 2018. The Company sold 399,821 vehicles
within the domestic market, representing a growth of 23.3% over
Fiscal 2017. The market share of CVBU for Fiscal 2018 was 45.1%. All
segments with the exception of buses showed strong growth in Fiscal
2018.
Product Range: ACE RANGE, XL RANGE, YODHA RANGE, COACHES, URBAN BUSES, CONTRACT CARRIAGES, VANS,
ULTRA RANGE, SFC & LP RANGE
Highlights:
M&HCV volumes grew by 15.5% in Fiscal 2018. Several new products were launched across the SIGNA, PRIMA and
conventional platforms – SIGNA 4923.S with Bell Crank suspension, SIGNA 3718, SIGNA 3718.TK, Prima 2530.K Scoop,
Prima Lx 3125.K 23cm, LPK 2523 ULTIMAAX, LPK 2518 7 Cum RMC Bogie
Tata Yodha – This media campaign won the Bronze award at the prestigious Effies in India.
Potential Upsides:
• The Company is present across all segments of commercial vehicles and passenger vehicles with over 6,600 dealerships,
sales, services and spare parts network touch points globally.
• Highest share in CV market in India.
• Recent Government contract for Electric CVs.
• Expansion of business through potential M & A
• Lowering fuel prices, infrastructure developments
• Development in E commerce and logistics and government policies.
• In the Budget 2018, Government of India has plans to complete 9,000 km of national highways by Fiscal 2019 and
35,000 km under the Bharatmala project at 5.35 lac crore. With the allocation of funds to improve national highways;
commercial vehicle industry will benefit from this increased connectivity.
• The sales of the Company’s commercial vehicles in India outperformed the industry with a growth rate of 23.3% to
399,821 units in Fiscal 2018 from 324,175 units in Fiscal 2017.

Challenges:

• High competition risk and costs increasing. Fluctuations in fuel prices

• Stiff market competition from Maruti and Mahindra Ashok Leyland and new players from china
• Geo-Political scenarios like Brexit
• Increasing production costs
• Technological changes and stricter emission norms
• Involved in diverse products may lead to conflicting strategies