The Hindu Business Line : Pick-up truck segment making strides

WILL the next revolution in the automobile industry be in the pick-up truck segment? Going by the trends of the last two years and the plans that automobile companies are drawing up for the future, the pick-up truck segment is set to witness a lot of action.

When the more glamorous passenger car segment of the automobile industry hogged all the limelight with its double-digit growth during the last two years, sales in the pick-up truck segment has quietly been shooting up at a blistering 60 per cent rate of growth. The market as a result has grown from about 17,000 units during 2001-02 to about 42,000 units now. The booming growth in this segment is expected to continue, though the growth rate, as the base increases, is unlikely to be as high as in the past two years.

The growth potential in this segment is already attracting a number of automobile companies that are not currently present in this segment. Multi-national auto manufacturers like Ford, Toyota and General Motors are said to be watching the pick-up truck market carefully and may make a foray in the near future. In fact, market sources claim that Ford and Toyota are already testing their popular Ford Ranger and the Hilux pick-up trucks respectively. GM too, has a number of pick-up trucks under the Chevrolet and GMC brands.

In the last two years, the explosion in pick-up truck sales has been abetted by a number of factors including the increase in rural disposable income, the jump in the Government's infrastructure spend, which has in turn dramatically improved the road network and the increased load-carrying applications that a booming middle class in the cities has necessitated.

Says Mr Rajesh Jejurikar, Vice President, Sales and Marketing in Mahindra & Mahindra (M&M), "The market's dramatic growth during the last two years has been due to the improvement in road infrastructure." He adds that while the growth story will continue, pricing and value will become even more important in the future. "Multi-national automobile companies can only hope to be niche players in this segment. It will be the Rs 3.5 lakh to Rs 4 lakh price bracket that will witness the most action," he added. M&M is the largest player in the pick-up truck market with a share of over 60 per cent.

Further, a 60 per cent share in the sales of pick-up trucks comes from rural demand and 35 to 40 per cent of the sales come from demand in semi-urban and urban areas. Yet, future growth in demand for this segment is expected to come from urban areas due to an increase in applications. Intra-city transport is being increasingly undertaken by the entrepreneur-owner or by logistics companies that need to be better equipped to handle large volumes, especially in the FMCG and consumer durables segments. Entrepreneurs who run small businesses are also likely to appreciate the higher comfort levels in these vehicles, since pick-ups come options such as air-conditioning and better suspension.

However, growth for pick-ups will also hinge on the Government's policies for this segment. Says Mr Vinay Piparsania, Vice President - Marketing, Sales and Service, "Ford will be interested in offering products in this segment. However, growth will happen only after the Government classifies pick-up trucks along with other personal use vehicles like passenger cars." He pointed out that since pick-up trucks are used mainly by the entrepreneur for both his household and business needs, the differential excise duty should be removed to make the vehicles more affordable.

Pick-up trucks are usually built on the same platform on which sports utility vehicles and, in some cases, family vans are built. The pick-up truck is preferred by small businesses, since the cab in the front and load carrying area at the back are low-slung (unlike larger trucks) and are designed for easy loading and transport. Pick-ups are usually built to carry only a maximum capacity of about 1.5 tonnes.

Currently, the Government levies differential excise duty rates for pick-up trucks with a single cab and for ones with a dual cab (two rows of seats). While one is considered a commercial vehicle, the other is considered a passenger car.