Our growth estimation for 2017 is 13%: Vinod Aggarwal of Volvo-Eicher

 

Volvo

  Having received bulk orders from various state transport corporations, Volvo-Eicher Commercial Vehicles is bullish on the bus segment, where it has risen market share in recent times. Vinod Aggarwal, CEO of Volvo-Eicher Commercial Vehicles shared his views on the CV industry growth prospects post demonetisation in a chat with Sohini Das. Edited excerpts. 

 

Do you think demonetisation was overestimated because the numbers don't look that bad? The numbers are neither very bad nor good. The impact of demonetisation may not be very large but it's still there. The period October to March is the peak for the industry. This year, growth was excellent between April and June.

In fact, from January to June, the growth was excellent. There was some drop in July-September but still we were expecting some growth in the festive period. This was due to good monsoon and there was a lot of positivity in the rural economy. Money availability, liquidity and other parameters of the industry like economy and infrastructure were going good and everything was positive. We were expecting a good response for November, December and January as well.

Whar's the growth expectation from the industry? Earlier we were expecting the industry to grow by 10-15 per cent. On the other hand, industry started dropping. When we look at the figure, the drop is not that large. For example, in the domestic five-tonne truck market, for the month of December, the drop is 12 per cent over year-on-year. But, the expectation was that it should have grown by 15 per cent, so that way the swing is around 25 per cent.

Which segments of the CV industry have been more immune compared to the others? Big organised players in the transport industry (for example the Transport Corporation of India) were not that impacted. Also, the core mining truck or public sector undertakings were also not impacted.

The maximum impact which is coming right now, it's because of slowdown in the economic activities. Small transporters who would buy used trucks. But due to cash related issues still in the market, the used trucks market has come down significantly.

But the people are coming to terms with the changes because at the end of the day, the business people have to find solutions to the problems. If the rule of the game is that we have to adjust in the less cash economy, then everyone will adjust to it. The transporter and the business people will go out of the way to make sure that his business is not impacted. The real impact is because of the drop in the consumption. Next impact is on the labour.

What is the outlook for the upcoming quarters? We are very optimistic about this quarter, January to March. New norms are going to be applicable from April 1, 2017, which will induce some pre-buying of BS-IV trucks anticipating a price hike. On the other hand, GST which was to come from April, is also unlikely to come in by then. There would have been some benefits for customers on the account of GST. In earlier scenario, if GST and BS IV would have come in around the same time, the additional cost of the vehicle would have been balanced by benefits from GST implementation. Another good thing is the interest rate is also coming down. It is a very positive factor.

What is the growth expectation for CV industry from January to March? Last year, the industry figures from January to March were good. For example, last year, around 70,000 to 72,000 units were sold from January to March period. It means that every month it has to be around 30,000 to 32,000 units. If we are able to do this, then we are good. For heavy duty trucks, this year in December, 17,000 were sold and last year it was around 20,500 units. This is the 16 tonne and above trucks market. Going by last year's number, this year between January to March, if we are able to do 24,000 units per month, that would be good as the last year base was high.

At Volvo-Eicher, which are the segments you would bet on? In the light and medium duty trucks (5-15 tonne), the industry had peaked in 2011, at 105,000 units. Then it dropped to 62,000 in FY15 and 72,000 in FY16. For the current fiscal, 80,000-85,000 units were expected to be sold. However, demonetisation impact on this segment has been more as it is dependent on rural areas and small businessmen. We see much potential in this segment. The JV had started with 26 per cent share, and now we have around 33% share in this segment. Second is the bus market, where we now have a 17 per cent share, but the segment is doing well this year for two reasons; demand from state transport undertakings and also the replacement segment. This year so far, the segment has grown by 16 per cent. We had a 6 per cent share of this market when we had begun. But, we have the highest market share of around 65 per cent in the high-end truck segment. 

What kind of exports are you doing from your Pithampur plant? Last year, we exported 6,500 trucks, this year we have grown by 27 per cent. This year in first nine months, we exported 6,200 trucks compared to 4,700 units last year during the same period. Right now, its contribution is around 15-20 per cent of the overall sale but going forward as we also grow our domestic market, we would like to have minimum 15% of the export share out of our total share.

What is your overall growth estimation for VECV in FY17?
If we are able to maintain the growth, we estimate to grow around 13 per cent this year.